St Modwen has been granted outline planning permission and conservation area consent for a £20m mixed-use development next to the Weavers Triangle area of Burnley.
The developer plans up to 168 new homes, retail units, leisure facilities and office space on seven acres.
The site, formerly occupied by shoemaker Lambert Howarth, includes two 19th Century mills which have suffered from vandalism and looting, rendering them too damaged for restoration. St Modwen will retain the façade of Finsley Gate Mill.
Michelle Taylor, regional director of St Modwen, said: "Healey Royd and Finsley Gate mills have attracted anti-social behaviour and become structurally dangerous, meaning the site is in great need of regeneration. The approved plans will retain the historical heritage of the area, while still creating much-needed, modern housing for future generations.
"We are very eager to get started on the project. With its superb canal-side location, we're confident it will create an exciting new focal point at the heart of Weaver's Triangle."
Weavers Triangle covers 54 acres and is designated within the Canalside Conservation Area straddling the Leeds-Liverpool Canal. It is currently the subject of a separate development contest, with two developers including Barnfield in competitive dialogue with the council.