Angus councillors have voted to approve the bid to turn the former Strathmartine Hospital into a new housing development.
Offshore investment company Heathfield, which purchased the hospital a decade ago, submitted proposals for 198 new houses as well as 24 properties within the listed main building and existing cottages.
Angus Council planning chiefs recommended the application be refused, saying it is “contrary to development plan policy”.
But at a council meeting this afternoon, councillors voted 12-9 in favour of approving the plans.
A report issued before the meeting stated: “The site is within the development boundary of a village and it is identified as an opportunity site by a specific policy that limits residential development to a maximum of 40 units.
“Accordingly, a proposal for 224 dwellings at this location is contrary to development plan policy.
“There is planning policy support for a development that would allow those issues to be addressed, but the number of housing units proposed is contrary to specific policy dealing with the site.
“Other contributions in respect of affordable housing and public transport would further compromise viability.”
A spokeswoman for the developers said that “common sense prevailed”.
She said: “We are very pleased at today’s decision and delighted that commonsense prevailed.
“A great deal of time and effort has gone into developing our proposals for Strathmartine – ensuring that we bring forward an appropriate and sensitive development on the site.
“We look forward to working closely with Angus Council and would like to thank members for their support today.”
Strathmartine Community Council secretary Duncan McCabe said: “I find it quite incredible that these councillors should reject the recommendations of their own planners, overturn not one but two local plans, and dismiss the opposition of 95% of the local community to side with a speculative developer based in a tax haven.
“In an era of increased community empowerment, when Angus Council themselves talk of community involvement and even community-led planning, this decision is profoundly anti-democratic and stunning in its hypocrisy.
“We have not given up and Strathmartine Community Council will be discussing all and every means of continuing our opposition to this development.”
Heathfield claimed despite local planning policy limiting new-build housing to 40 units, the site needed a “far bigger development” to be commercially viable.
But Strathmartine Community Council expressed concerns the area would become part of Dundee’s “urban sprawl” if the plans were given the go-ahead.
A survey of all households in the area showed 95% opposition to the proposals, leading the community council to formally reject them. Dundee City Council also raised an objection following concerns over traffic implications on the A90 Kingsway.
Robert Evans, of Muir Smith Evans, which represent Heathfield, had ruled out redefining the proposals and said that a refusal “could be the death knell” for the site.