The decision means that the school inspectorate, Ofsted, has branded half of the eight secondary schools in the borough of Westminster as having "serious problems" and two have been declared to be failing.
The Ofsted report on St George's School, in Maida Vale, is thought to conclude that the standard of teaching overall is below acceptable levels.
The inspectors are critical of "pupils' attainment" which "remains below the national expectations".
They say "improvements are required in tackling poor attendance and truancy", and the proportion of lessons which are good or satisfactory is around 10 per cent below the national average.
The report is also critical of the management of the school, which inspectors believe is insufficient to deal with serious difficulties the school faces.
When Mr Lawrence was appointed in 1993, St George's was threatened with closure. An Ofsted report that year said "urgent action" was needed to redress "the significant level of underachievement".
Mr Lawrence took a tough line and expelled 60 pupils during his time at the school. His no-nonsense policy paid off and the academic legacy was a threefold increase in students passing five GCSEs at grades A to C, up to 20 per cent in 1996 from 6 per cent in 1994.
Shortly before he was murdered by Learco Chindamo in December 1995, Mr Lawrence said: "This school has turned around. Like the phoenix, we have risen from the ashes."
Commenting on the Ofsted decision, Mr Lawrence's widow, Frances, said: "I'm not at all surprised given the ethos of the school now. I foresaw this. I think Philip would be terribly disappointed. He took a very tough line - but in a healthy way. He gave his life to those pupils before he died.
"I hope they focus on the right areas to improve it. I should very much have liked to have continued to be involved in the school but I haven't been allowed. But I will always feel an involvement with the school."
Opposition councillors on the Tory flagship council are angry that the school has been allowed to sink so low.
Labour education spokesman Paul Dimoldenberg said: "The memory of Philip Lawrence has been let down. This is a sad betrayal."
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