The decision for the 420sq m building, to be built on the edge of Lake Wanaka in the Roys Bay Recreation Reserve, was released last night.
When publicly notified in November the application received 1042 submissions, 744 of which opposed.
Queenstown Lakes District Council planner Sarah Picard recommended the application be refused.
Many opposing submitters said the facility would destroy amenity values at that site, which is classified as an Outstanding Natural Landscape (ONL) area.
Some submitters thought another site should be chosen, and many were considered at the hearings in March and April.
In their decision, commissioners Robert Nixon and David Clarke said the chosen location was the most suitable of those suggested.
"If this site is not suitable, then there is a real possibility that no other site will be suitable either, given that all but one are within an ONL, and the other is on a site where it would be a noncomplying activity."
The chosen section of Roys Bay had a greater ability to absorb change than many other parts of the Outstanding Natural Landscape, and was therefore most suitable for this facility than other parts, they said.
"So that this observation not be misunderstood, this does not mean that it does not have an element of natural character and considerable aesthetic value."
In response to submissions the facility would create a precedent for more similar applications on the lake front they said this was unlikely, and each application would be taken on its own merit.
Overall the effects of the facility on the natural environment would be "no more than minor", they said.
"On balance, we are satisfied that recognising the status of the area as a recreation reserve, the site is suitable for the building proposed."
The Wanaka Watersports Facility would provide storage and facilities for "non-motorised watersports" on a part of the lake popular with rowers, swimmers, triathletes and multisport athletes, stand-up paddleboarders and kayakers.
The application was approved with 39 conditions.
