The four-star Terraces Hotel will sit on land behind the Hilton Queenstown and DoubleTree hotels on a north-facing, excavated site with views across Frankton Arm.
Lakes Edge Developments Ltd, a company linked to Queenstown developers Chris and Michaela Meehan, applied for consent last May.
The site was originally planned for a five-star hotel in 2006 as part of the Kawarau Falls Station development, but that was never built after financial trouble for the development company three years later.
In their decision, chairwoman Jan Caunter and commissioner Lee Beattie said the two main issues were car parking and access and construction noise.
Kawarau Village Holdings (KVH), owner of the Hilton Queenstown and DoubleTree hotels, had argued the proposal should include 93 car parks - 20 more than the 73 provided for by the developer and required by the operative district plan.
However, that figure had been calculated from a survey of parking carried out on a single day, and was ''not reliably representative'' of typical demand.
Of the 73 car parks, 58 will be provided by a multi-level stacking system.
The hotel will breach the 10m height standard by up to 10m.
In his report, Queenstown Lakes District Council planner Andrew Woodford recommended the application be granted, saying adverse effects from the building's bulk and scale, as well as car parking and vehicle movements, were no more than minor.
Adverse effects from noise had been adequately mitigated or minimised, Mr Woodford said.
The commissioners said the building's architect had amended his design in response to concerns by KVH's urban design expert about the impact of the building's length - and its height at its western end - on the streetscape and adjacent hotels.
Consent conditions include supplying construction traffic management and noise management plans to the council for approval.
The hotel is expected to take two years to build.
