Manchester City Council has granted planning permission to the owners of the nightclub, located off Oxford Road in the city centre, to be refurbished for student accommodation.
Hale Leisure plans to create 60 en-suite student units across three floors above the Jabez Clegg bar, including the first floor previously used for the nightclub, and add an extension to the building to include a further 19 units across four floors.
The ground level bar will be maintained and refurbished as well as extended to provide a coffee shop facing onto Brighton Place.
Aiden Clancy, director of Hale Leisure, said: "The redevelopment will cost between £5.5m and £6m. Work could start in June next year and it will take 14 to 15 months at most, so it could be completed by September 2013."
"The redevelopment will offer 79 boutique en-suite apartments right in the heart of the University of Mancahester campus, so it is ideally located."
Designed by Didsbury-based Space Architecture, the new extension will double the floorspace area from 14,000 sq ft to 28,000 sq ft.
A study undertaken by Steve Levrant Heritage Architecture was carried out to find out whether the former Church Hall building, originally designed by architect Edmund Kirby in 1892, was eligible for listing status.
The building is located next to the Grade 2-listed Presbytery and the Grade 1-listed Holy Name Church on Portsmouth Street.
Space concluded that the building would be considered listed by attachment to the Presbytery, but said its attachment may be removed with minimal damage.
Space also investigated the age and rarity of the Jabez and added it would also not be listed on this basis because it would not attract any "special interest".
Hale Leisure was established by Clancy and his business partner Eamonn Dwyer in 1991.