The consent was non-notified and there is a 15-day period to allow for appeals.
The village will be called Summerset at Bishopscourt, following suggestions from locals, and is sited in Chapman St, although the entrance is likely to be shifted to Shetland St once the development is started.
The first houses were expected to be completed next year, with residents moving in soon afterwards.
"In the past, Dunedin residents who wanted the benefits of true retirement village living have had to move to Mosgiel.
"By building this village, we are providing the city's citizens with a choice to retire in the vicinity of the area [where] they have lived, worked and raised families for the majority of their lives."
Summerset gained approval after extensive consultation with the Dunedin City Council and planning staff, Ms Barlow said.
It was different from some other developers, as it built the village then stayed, owning and operating it with its own staff.
The 1.9ha site, which would house about 200 residents, would be completed in several stages. The village would create 40 to 50 permanent jobs.
It would include independent villas and apartments through to a care centre providing up to hospital-level care.
The village would be Summerset's second in the South Island - its purchase of an existing village in Nelson was confirmed last month.
Summerset Group owner, Australia's Quadrant Private Equity, announced last week it planned to partially list the retirement home operator on the NZX next month.
Volatile market conditions are believed to have played a part in Quadrant deciding to offer just 30% of its majority stake for sale.
Summerset said in a statement it had registered a combined investment statement and prospectus for the offer, which is aimed at raising $122.5 million to $136 million at an indicative price range of $1.40 to $1.60 a share.
Once listed, Summerset, with an expected market capitalisation of $301 million to $336 million, will become a top 50 stock.
Brokers say Summerset will be a welcome addition to the NZX and put it in a different class to Ryman Healthcare, which owns the Yvette Williams and Frances Hodgkins homes in Dunedin.
At a glance
• $60m retirement village approved.
• 120 units.
• About 200 residents.
• Between 40 and 50 permanent jobs.
