Salford City Council has given planning permission to City West Housing Trust's £14.3m Barton Village scheme in Eccles to regenerate 236 homes.
Contractor Bullock Construction has started on site with the transformation of four high rise blocks expected to be completed in 2015.
City West Housing Trust said energy efficient products and technologies are central to the scheme potentially saving tenants up to £200-a-year in fuel bills.
The housing trust added that existing tenants, many of whom have lived in the blocks since they were built in 1960, have been given first choice on the homes once they are completed.
Colette McKune, director of asset management at City West Housing Trust, said: "Barton Village addresses all the key issues facing organisations tasked with regenerating communities and is revolutionary in many ways due to the technologies used and the approach taken to high rise social housing blocks.
McKune said consultation is on-going with customers about what they want to feature in the large open green spaces on the site with options including an orchard and allotments.
McKune added that once the community centre located by the four blocks is demolished and relocated in the centre of the village, additional plans could see 14 energy efficient homes built next to Bridgewater Canal.
A nearby parade of shops are also being converted and let with one becoming a café and catering training centre.