Construction of a £20m leisure centre has been halted after more than 500 skeletons dating back to medieval times were unearthed beneath the site.
Archaeologists discovered 25 crypts in Elephant and Castle, which were used to store remains, some of which date back to before the Black Death in the 1300s.
The team had expected to unearth the remains of a burial site but the extent of the findings was far greater than expected. They said there was “an unusual concentration of babies and children”.
The site, being developed as part of the £1.5bn regeneration of the area, is now the scene of a full archaeological investigation,
The remains have to be reburied, unless they pose any risk to health, in which case they would be disposed of as hazardous waste immediately.
Dr Patricia Dark, manager of Southwark Local History Library and Archive, said: “I think the find’s really fascinating.
“It’s great to have such a tangible link to the past – that bit of the Elephant is so close to the modern roundabout that we forget that for hundreds of years people lived and worked there, and called it home.”
The Ministry of Justice, which governs what now happens to the remains, has issued Southwark council with a licence to carry out the dig.
Council leader Peter John said: “The remains will be treated respectfully and we will be following the Ministry of Justice’s guidance to peacefully re-bury or relocate them. The leisure centre work will resume as soon as we’ve sensitively dealt with this issue.”
In medieval times it was the site of church and graveyard of the rural village of Newington Butts, known as St Mary’s of Newington.
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By the mid-1800s the population of the area soared to more than 54,000, making it one of the most densely populated areas in London.
It is believed most of the bones discovered were carefully placed in the crypts in 1875 when the graveyard was lost due to road widening at the junction.
Other skeletons were discovered beside the crypts, in graves 6ft 6in (2m) deep.
The council is hoping that the majority of the remains can be buried in a Southwark cemetery.
The extra archaeology works will delay the beginning of construction of the leisure centre by around three months from November 2012 to February 2013.
The sports centre was due to open in summer 2014 and will include a swimming pool, a badminton courts sports hall, a gym, dance studio, a crèche and café.
