The 400,000 sq ft mixed-used project was approved by Cheshire West & Chester Council at an extraordinary planning committee meeting yesterday afternoon.
The £300m project aims to deliver retail, restaurant and leisure facilities built over two phases of construction.
Phase one, which is forecast to start in autumn 2017, will see the development of two restaurants within the shell of the current library building, a new market hall replacing the current Chester Market, a six-screen cinema and a 167-bedroom hotel and conference centre, as a replacement for the Crowne Plaza Hotel.
Picturehouse was announced as the cinema operator last week.
The Crowne Plaza, Forum Shopping Centre and several other buildings on the site would be demolished in 2019. Work would then begin on the second phase of construction to create the main retail offer, department store and residential.
The Northgate development has been in the pipeline for more than a decade. After two failed development agreements with ING and Scottish Widows, a masterplan emerged in 2011 and was then reworked after developer Rivington Land was appointed in July 2014 to steer the scheme through the planning and development process.
Architect ACME and surveyor JLL advise Rivington, while Strutt & Parker was appointed in August to look at funding options.