The 20ft (6m) high inflatable, dubbed “Trump Baby”, has been granted permission to rise above Parliament Square Gardens for two hours on Friday morning.
Mr Khan said he supported the decision taken by the Greater London Authority, adding that it was not for him to be a “censor”.
In a frank exchange with Piers Morgan on Good Morning Britain, Mr Khan said: “My views are irrelevant. The issue is ‘Do they have freedom to protest, freedom to assemble and should they be allowed to do so?’
“If it’s peaceful and it’s safe they should, Piers.”
Morgan asked the mayor if he would have endorsed a giant black baby blimp of Barack Obama in protest during his presidency, or an image depicting Mr Khan as a pig despite that being offensive to Muslims.
Mr Khan said: “If it’s peaceful and if it’s safe. Look, I can’t be the censor. It’s not for me to decide what’s in good taste or bad taste.”
Mr Trump’s schedule will largely keep him out of central London and it seems unlikely that the US president will come close enough to Westminster to see the blimp.
He will arrive in the UK on board Air Force One on Thursday afternoon, straight from the Nato summit in Brussels, and will carry out a series of engagements on Friday before heading to Scotland for the weekend.
Mr Khan and the American leader have engaged in a long-running war of words over issues like crime and terrorism.
Morgan said it was “utterly ironic and weird” that there could be bigger protests around Mr Trump’s visit than during trips to the UK by the leaders of countries with questionable human rights records including Saudi Arabia and Turkey.
But Mr Khan said it was important that the UK could be “candid” with the US as a close ally, saying “that’s how special relationships work”.