The controversial Wilton New Town development has long divided public opinion.
However on Tuesday night the Sydney Western City Planning Panel approved Walker Corporation's development application for the first of six stages in the South East Wilton precinct.
The approval has paved the way for the first 696 lots.
Walker Corporation senior development manager Oliver Roborgh said families were now one step closer to calling South East Wilton home.
"The delivery of housing and infrastructure in South East Wilton will help create more than 100 construction jobs which is vital to ensure local communities can thrive and anchor local jobs into the future," he said.
"Importantly, new traffic signals at the Pembroke Parade and Picton Road intersection will be built before construction of the first new home in South East Wilton, improving safety for motorists."
Mr Roborgh said Walker was proud to have been part of communities in Wollondilly for more than a decade.
"We are delighted to have already delivered quality new housing and infrastructure to Appin - but we're also thrilled to have been able to contribute to the area by restoring the historic Appin Inn, supporting clubs like the Appin United Soccer Club as well as community causes such as the Build for a Curecharity house in Appin," Mr Roborgh said.
"Walker appreciates that Wilton is a great place to live for families and we know the local environment is a big part of what makes the area so special - that's why we believe with careful consideration and investment we can improve outcomes for the local environment."
However Wilton Action Group president Brian Williams said the panel's decision was disappointing.
"It was a divided decision with two panel representatives voting against it, and the other two voting for it," he said.
"The chairman's casting vote decided the development application would be approved despite the weight of all the evidence presented by local experts.
"We are still concerned about waste water management and more importantly water supply for all of these new residents.
"Dr Ian Wright also raised concerns about koala management and the environment.
"Climate change also needs to be taken into account especially how it will affect water supply."
Walker Corporation is seeking to build more than 3300 dwellings in the south east precinct.
The entire Wilton development will eventually be home to more than 20,000 people.
MORE TO COME