Nigel Farage attacked Sadiq Khan for wanting prisoners to be prioritized for social housing when they are released.
Around 1,650 were let out on Tuesday under the government's plan to free up spaces in the country's packed jails.
London's mayor said he wants criminals to be put to the front of the queue to cut reoffending rates.
Mr Farage lashed out at the senior Labor politician for prioritizing offenders over other people waiting on housing lists.
He said: “Sadiq Khan wants free housing for criminals and illegal migrants. And he wants you to pay for it all.”
Conservative leadership contender Robert Jenrick said the policy shows that Labor puts “decent people last”.
Mr Khan made the comments at The Times's Crime and Justice Commission.
He said there is “a big shortage of housing in London” but said there needed to be an “honest conversation” about the need for some prisoners to “jump in the queue to get housing to avoid them reoffending again”.
When asked if he meant that offenders should “jump the queue”, the mayor said: “A certain percentage. Yeah, it's the honest conversation we've got to have with people across our respective cities and stuff to explain the reason we're doing this.”
The exodus of offenders across England and Wales came after Justice Secretary Shabana Mahmood announced plans in July to cut temporarily the proportion of sentences which inmates must serve behind bars from 50% to 40%.
The Ministry of Justice (MoJ) said overcrowding had pushed jails to the “point of collapse”.
Among those pictured walking free were fallen Hollywood actor Jason Hoganson, who was released early from serving an 18-month jail sentence at HMP Durham after reportedly beating his ex-girlfriend in the street.
According to court reports, Hoganson – who had a leading role in the 1987 film Empire State – was sentenced after admitting assault by beating and breach of a restraining order and has accumulated 109 convictions after turning to drink and drugs.
Lawson Natty, 19, who was jailed for 32 months in March after being cleared of murder but found guilty of manslaughter, is eligible for the early release scheme and could leave prison within weeks.
Others due to be released under the scheme include Adam Andrews, who was jailed for three years after being convicted of grievous bodily harm without intent for reportedly shaking a baby so violently he was left blind, paralyzed and now needs round-the-clock care. He is eligible to be released early because his sentence for a violent offense involves a prison term of less than four years.