The Launderette of Dreams features Ilori's signature bold colours and geometric shapes, applied across ten "washing machines" and the walls of a shopfront on Bethnal Green Road in east London.
The installation also incorporates more than 200,000 Lego bricks, which are used both as a structural material and as objects for play.
Children are invited to play and socialise in the space, which also includes hopscotch floors, a giant Lego mural and a vending machine that dispenses toys instead of soap.
Ilori wanted the installation to pay tribute to the multifaceted role that laundromats can play in communities, while harnessing the creative optimism of children to transform an everyday shopfront.
He said the project was rooted in the strong childhood memories he had of playing at his local launderette on Essex Road, north London, while the adults were preoccupied with laundry.
"It was where I could dream about the things I wanted to achieve," said Ilori. "We often forget about the mundane spaces which play an important role in bringing the community and people from different cultures and backgrounds together, as well as providing an opportunity for kids to meet, play and share ideas."
"Community launderettes are essential to the fabric and DNA of many communities," he continued. "I hope the Launderette of Dreams inspires both adults and children to believe they can dream and create anywhere."
Ilori invited children from his former school, St Jude & St Paul's C of E Primary School, into the design process.
During a visit to a local launderette, he had them think about how they would rebuild the space for the better and bring people in the community together, and their ideas shaped what would become the Launderette of Dreams.
A key feature of the space is its washing machines, which contain kaleidoscopic light installations and Lego creations in the drums. Some machines are interactive and can be spun.
Another main play area is the Lego mural wall, which allows visitors to build, disassemble and rebuild the design using Lego bricks.
The installation is part of the Lego Group's Rebuild the World advertising campaign, which celebrates children as "the masters of creative problem solving".
The Launderette of Dreams will be open from 28 October to 6 November at 133-135 Bethnal Green Road, London, and entry is free.
Ilori is a London-based designer who calls on both his British and Nigerian heritage in his work.
His recent projects have included colourful crosswalk installations for the London Design Festival and a rainbow-hued 3D-printed basketball court.
He was also the creative director of this year's Brit Awards and designed its trophies together with Es Devlin.
The photography is by Mark Cocksedge.