The development of 12 flats and a shop on the site formerly occupied by Bob's DIY store was rubber-stamped by Bracknell Forest Borough Council's planning control sub-committee on Monday.
The decision is a victory for the Crowthorne Initiative redevelopment scheme - set up to boost trade in village - which has been fighting for the development for several months.
And traders have also welcomed the plans, saying the plans will give a vital boost to trade in the village.
But the move has disappointed parish councillors who fear the development will out of keeping with the street scene and spark further traffic jams.
In August, similar plans to build a four storey building on the High Street were refused.
At Monday's meeting, councillors were reassured the original plans had been altered to reduce the overall length and height of the building.
However, the changes did not satisfy Cllr Lars Swan, who fears the development, which also includes 20 parking spaces, will create traffic chaos. Speaking after the meeting Cllr Swann said: "I am disappointed this went through.
"The parking is going to be a problem and we are not happy because it will create extra traffic - but we have to accept it now.
"The traders will be pleased it has finally gone through."
Cllr Cliff Thompson, chairman of Crowthorne Parish Council and member of the Planning Control Sub Committee, also voiced reluctance for the development to go ahead.
He said: "This is an application that gives me no great pleasure.
"There is still bulk to this building and it represents the maximum that could be there.
"With this application parking does remain a concern.
"As far as parking is concerned, we have a village that is full - there is no room for anything else."
But Carol Zuccaro, of Crowthorne Traders' Association, welcomed the decision, saying it would help bring more trade into the village.
She said: "As long as it remains retail on the floor I think it will boost trade in Crowthorne.
"Most traders will welcome anything that increases trade so long as there is sufficient parking space available for the flats, which is always a concern - we don't want parking space to be taken away from shoppers."