Burnley Council has signed-off the developer's plans to convert the canalside mill into 18 townhouses.
The project within Weavers' Triangle will see the development of leisure space, and the creation of new public realm and a footbridge.
The 19th-century mill will be partly demolished to make way for the residential units, however the façade and chimney will be retained and restored.
The scheme is due to be brought forward alongside St Modwen's nearby Healey Royd Mill project, which has permission for 149 homes.
Both Finsley Gate and Healey Royd Mills were formerly occupied by shoemaker Lambert Howarth and were acquired by St Modwen in 2005.
St Modwen was granted outline planning permission for the £20m scheme in 2011.
Steven Knowles, development director at St Modwen, said: "The planning consent is an important step forward for Burnley and will bring in new job opportunities and investment into the town. The scheme will bring forward new homes to Burnley and will act as a catalyst for the regeneration of the wider area."
Work is expected to begin on site in the New Year. AEW Architects designed the scheme.