Proposals to convert the dilapidated 1950s complex into a modern, fashionable place to live with shops, restaurants and bars were approved at Sheffield Council's City Centre, South and East Planning and Highways Area Board yesterday.
But Liberal Democrats condemned Park Hill as "much-loathed" and "an eyesore" that should be torn down instead.
Under the plans, the existing 1,000 'homes in the sky' - a listed building protected by English Heritage - will be turned into 874 refurbished flats by trendy developers Urban Splash.
About two-thirds will be for sale on the open market and the rest managed as 'affordable housing' by Manchester Methodist Housing Association.
Modern buildings, including shops, offices, the community centre and Park Hill School, will be demolished, but the bulk of complex, which was completed in 1961, will be repaired and spruced up.
There will also be new community facilities and a multi-storey car park, a rooftop cafe and a glass art gallery.
Labour's Coun Mazher Iqbal said: "We all have to welcome this. We are not preserving this building simply because Labour want to, we are preserving it because the residents of Park Hill want us to. We have been waiting for this for a long time."
Coun Peter Price added: "The popularity of city centre living has exploded over the past few years. There are people living next to the Peace Gardens in flats that are worth £200,000 that are a lot smaller than the ones in Park Hill.
"I think it will be popular. Developers don't put money into these schemes unless they think there is going to be a return."
But Liberal Democrat Coun John Hesketh told the meeting: "Park Hill is not quality building, despite its listed status. No matter how good Urban Splash are they cannot airbrush that out. This is a golden opportunity that has been missed. Park Hill is an eyesore that long ago should have been torn down, not refurbished. This will freeze it in time."
Simon Gawthorpe, of Urban Splash, told the meeting that they hoped to put "a sense of pride back into Park Hill and make it a place where people will enjoy coming to live, work and play".
English Heritage had considered the plan to be of such importance that it sent its national committee northwards to visit the Grade II* listed complex before giving its own approval to the scheme.
Because of its listed status the demolition of Park Hill is prohibited by law, unless every viable alternative to rescue it has been exhausted.
Sheffield Conservatives leader Coun Anne Smith said: "I opposed the listing of Park Hill back in 1998, I thought it should never have happened. But it was and we are where we are.
The proposals were carried by five Labour votes to three Lib Dems against, with one Lib Dem abstention.
Coun Bob McCann, Lib Dem shadow cabinet member for neighbourhoods, said following the vote: "The vast majority of people in Sheffield will be disappointed with this news. It means that the prospect of the much-loathed Park Hill site hanging over Sheffield for another 30 to 40 years is one step closer.
"However this is not the final nail in the coffin and plans could still be reversed."
A detailed plan of exactly how the refurbished building will look will be submitted in several months time for approval.
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