PAY-AS-YOU-GO Oyster Cards will finally be accepted on trains in Kingston and Richmond from January.
The long-awaited announcement means those travelling to and from central London will no longer have to buy separate paper tickets to complete their journey.
But the news has received a lukewarm reception from local politicians, who said more could have been done to simplify the system for season ticket holders.
Anyone travelling to a railway station outside the zones covered by their travel cards will need to obtain an Oyster extension permit.
These are free and are essentially travel permits. But anyone using one will need a pay-as-you-go balance of at least £1.50.
Twickenham MP Vince Cable said the scheme would hit the most loyal and regular passengers hardest.
He added: "Boris Johnson has failed to deliver on his pledge of better travel for Londoners. As of January, residents will have to suffer record fare increases and a botched pay-as-you-go system on the trains."
From January 2 a peak time cash ticket from Surbiton to Waterloo will cost £5, but £4.90 using Oyster.
Peak fares will fall from £4.40 to £3.90 using Oyster, and to Oxford Circus the cost will be £6.30 using paper tickets, or £5 by Oyster. Transport for London announced plans to expand the Oyster card system back in January.
But train operator South West Trains was slow to reach an agreement and was the last company to sign up. It has since installed ticket machines across its network, ready for the switch in the new year.
Boris Johnson said: "Thousands of residents in Hounslow, Merton, R i c h m o n d , Kingston and Wandsworth will now be able to use Oyster pay-asyou-go to travel from their local South West Trains station and then seamlessly hop on to TfL services without fumbling for another ticket or having to stop off and purchase one. Oyster will truly be the only ticket Londoners need to get around town."