NEW YORK, Aug 11 (Reuters) - Grand Central Terminal's owner withdrew a $1.13 billion lawsuit that had accused New York City of effectively taking away his air rights by allowing developer SL Green Realty Corp to build a skyscraper next to the landmark train station.

The voluntary dismissal on Wednesday of the lawsuit filed by Midtown TDR Ventures LLC and Midtown GCT Ventures LLC in September 2015 will allow construction of a 1,401-foot tower across the street from Grand Central to move forward.

The companies sued on behalf of Andrew Penson, who purchased Grand Central in 2006 for $80 million. The city's rezoning of the area around Grand Central made Penson's air rights "unsellable and therefore worthless" by letting SL Green, one of the city's biggest commercial developers, build the One Vanderbilt tower.

The skyscraper will rise on the west side of the historic train station on a site whose demolition is almost complete. Just east of Grand Central is the 1,046-foot Chrysler Building, once the world's tallest and now ranked No. 6 in the city.

SL Green gained permission to build One Vanderbilt in exchange for $220 million to improve the subway station below Grand Central.

(Reporting by Herbert Lash; Editing by Bill Trott)