Communities Secretary Eric Pickles has given the go-ahead on revised plans by Tesco's development subsidiary Spenhill for a £200m scheme in Kirkby town centre.
Knowsley Council approved the plans in March this year and said development will complement other projects which are either already ongoing or planned in the area.
This includes the creation of a new health facility, £1m of enhancements to Kirkby market and improvements to other council buildings, including the Kirkby suite.
Tesco plans to build another 90 retail and leisure units as well as a new 146,000 sq ft superstore.
Tesco's earlier plans were dismissed after a public inquiry in 2009. The scheme was reduced by 40% from 500,700 sq ft to 300,400 sq ft and a proposed stadium for Everton FC removed.
Cllr Dave Lonergan, Knowsley Council's cabinet member for regeneration, economy and skills, said: "We are delighted that the decision made by our planning committee has been upheld and we are now able to go ahead with this major development. It has been a long, and sometimes challenging, journey to secure the right kind of regeneration for Kirkby but we are thrilled that our proposals will now be able to proceed.
"In the current economic climate, the benefits of this project cannot be underestimated. The development will bring a welcome boost to the local area at a difficult time and will vastly improve the facilities and opportunities available to local people, something which the community of Kirkby has been demanding and something which it so richly deserves."
Claire Griffiths, Plus Dane's managing director for regeneration, welcomes the decision by Government on Wednesday.
Plus Dane, a housing association which is responsible for more than 15,000 homes in Merseyside and Cheshire, is exploring relocation options with 52 of its tenants. Working with Tesco and Knowsley Council, the group plans to develop new housing as part of the regeneration of the St Kevin's Drive area of Kirkby.
Griffiths added: "Developing a re-housing option at St Kevin's Drive will ensure that we continue to deliver quality housing and choice within all of our neighbourhoods. As the plans progress, tenants directly affected by the town centre re-development will be given the opportunity to play a part in determining the design and facilities for their new homes as part of the design consultation process.
"Plus Dane are committed to working with local people as this ambitious development work goes ahead. We are keen that local residents benefit from our Neighbourhood investor ethos which strives to enhance quality of life and offer opportunities to tenants in areas such as improved quality of housing, leisure facilities and access into employment."
No date has yet been set for work to commence on the Spenhill development.