Locate Developments now has permission to knock down the Star and Garter pub and a neighbouring restaurant to make way for the block, which will house up to 250 students.
The new building will also include a library, gym, common room, cinema and meeting rooms.
There were 38 letters of objection from members of the public, many of whom were concerned about overlooking.
Others were worried about the impact on the listed Arts Tower across the street.
Speaking on behalf of residents, Walkley councillor Olivia Blake said privacy was a key issue.
“The way the housing is currently oriented, the windows are not facing but you can see into the properties from the side,” she added.
“Given there will be five stories at the back, this will make it much higher than the buildings next door, and it will overlook the housing.”
Coun Blake also raised the issue of parking. The block only has five spaces, two of which are disabled.
But council planning officers said the angle of the tower would mean there was little risk of overlooking - and the only view would be to end gables with small secondary windows.
They also said they expected students who lived in the tower not to have cars, as everything they would need would be within walking distance. A residents’ parking scheme is in place in the area, which students would not be eligible for.
A decision was due to be made last month but councillors deferred it so they could visit the site.
Coun Bob Pullen said: “I think this is a step change in the quality of housing for students. They can get to most of the university facilities on foot.”
Coun Diane Hurst added: “When I put it into perspective and context I was convinced that this will enhance the site and be a welcome addition.”
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