Lancaster City Council's going to progress with the latest plan to transform the Canal Corridor North site.
The development involves the authority; land owners British Land; and Lancaster University, who want to include a student village.
The latest proposals for the dilapidated quarter surrounding the old Mitchell's Brewery include a mix of retail and food outlets; an 82-room hotel; accomodation for a thousand students; an underground car park; and an arts hub.
Last night, the City Council agreed in principle to support such a project and offer financial support - however, further negotiation and due diligence will be needed.
Plans to revamp the near 13 acre site between the city centre and the Lancaster Canal were first put forward well over a decade ago.
In 2010, a redevelopment was rejected by the government for not paying enough attention to to protecting and restoring the site's heritage.
Council and Labour group leader, Cllr Eileen Blamire, said: "This is an important milestone in progressing a scheme which could transform a tired area of Lancaster city centre, attracting new shops and restaurants, establishing an exciting new home for arts organisations like The Dukes and Ludus Dance, and creating hundreds of new jobs.
"It would bring new investment with the potential to deliver a real economic boost for the district, and give residents and visitors more reason to spend time and money in the area rather than travelling elsewhere.
"However, this decision only indicates the council's support for this kind of development and its financial support for the scheme in principle.
"The council and its officers will continue to be diligent in ensuring that the deal reached in the negotiations that follow will be in the best interests of this authority and everyone in the district."
Chief Officer for Regeneration and Planning, Andrew Dobson told The Bay: "There's quite a wide catchment of people that should be coming here as their main retail centre, but because we don't offer a higher order shopping experience they have to go so much further afield. There's a significant need to upgrade the city centre."
He added: "What we've got is a very important historic centre, that because it hasn't seen as much change it's got that wonderful character that is inherently Lancaster. What we need to do is provide for a modest amount of growth - don't overgrow the city centre, don't change it into a clone town - but to get it to the stage where it should be."