Social enterprise Youth First, which is 70 per cent owned by staff and 30 per cent by young people, took over running Lewisham Council's youth services in September.
All of the council's youth service staff - believed to be around 55 - have transferred to the new organisation, which has been awarded a three-year contract worth more than £3m after a tendering process.
The amount the council pays Youth First will reduce by £150,000 each year over the duration of the contract.
It will run the borough's five adventure playgrounds, five youth centres and a wide range of commissioned youth activities and services.
The move was agreed in June following a year of development and scrutiny. The council hopes it will give the service the best chance of growing and becoming sustainable.
Meryvn Kaye, chief executive of Youth First, said: "We will do anything to protect youth services in the borough because we believe they are vital to support Lewisham young people.
"It's amazing that the mayor and council are prepared to take this risk, which demonstrates real faith in the staff and the importance they place on young people."
Lewisham Council is the latest authority to develop an alternative model to provide youth services, including EPIC CIC in Kensington and Chelsea, Knowsley Youth Mutual in Knowsley and Young Lambeth Co-operative in Lambeth.
Earlier this month,
Devon County Council announced that it too intends to award its youth service contract to a staff-run social enterprise.
In August, Islington Council also rubber-stamped plans for a staff-run mutual to deliver half of its adventure playgrounds.