Developer Barratt Homes has been granted permission to create 62 houses where the Bannerdale Centre, off Bannerdale Road, stood until 2014.
The scheme will comprise 46 four-bedroom homes, nine two-bedroom properties and seven with three bedrooms.
Carterknowle and Millhouses Community Group had objected, saying traffic and air pollution would increase and that the houses were of ‘low-quality design’.
Elsewhere on the site, work is under way to build the Mercia School – a secondary with no defined catchment area, intended to address an increase in demand for pupil places. The school is expected to open in September and teachers are being recruited.