A full council meeting voted in favour of the revised proposal, despite the last-minute arguments of Cr Neil Collins, who believed the project should be "parked".
The project was announced last Wednesday, after six years of debate.
The latest design follows public consultation that heard opposition to a previous design that included an atrium over Harrop St.
Cr Collins told the meeting he would support the project once the decision was made, but still believed its cost - between $45 million and $47 million - meant it should be reconsidered.
He believed the project was one that could be deferred for a few years, to ease the financial burden at a time of economic recession.
"This is a big-ticket item - a really big-ticket item.
"With so much money involved at this time, this is one project which could well have been parked for a few years, and come back to," Cr Collins said.
He also questioned the "visually unattractive" design for the town-hall redevelopment, arguing there were "better opportunities for this amount of money for the city".
The cost of the project had risen from as little as $7 million when first suggested, to at least $45 million now, he said.
Another option was to find a new home for the city's central library, and use the old library building as a conference centre, he said.
Supporting the proposal, Kate Wilson said: "I think it's going to be a huge asset for the city."
Cr Chris Staynes said his only concerns were ratepayers' ability to fund it.
He had asked whether the project could be done in stages, so safety work required by government legislation could be done first, and the rebuilding of the Glenroy Auditorium later, to save money.
He had been assured, however, that was not possible, and would end up costing more.
Cr Staynes also noted with the stadium under way, and the council facing the essential town hall work, the result "perhaps" would be unaffordable for some ratepayers.
Cr Bill Acklin said the design would not affect the building's facade, a clear wish of the community.
"That has been achieved," he said.
Cr Fliss Butcher said it was a "really exciting project" that demonstrated the council's commitment to the city's heritage, and had the support of many ratepayers.
"Let's just get on with it," she said.
The meeting voted to approve the plan and endorse a timetable that involved seeking tenders for construction by the end of the year.
Cr Collins voted against, and Cr Paul Hudson abstained.
The project
Town hall: Existing entrance removed and replaced with cube-shaped glass entrance, refurbished or replaced seating in auditorium, safety work for fire and other regulations, infrastructure overhaul, air conditioning.
Dunedin Centre: Extended into Municipal Chambers to add space.
Glenroy Auditorium: Gutted and retro-fitted, new lifts, stairs, performance and conference areas, movable stage, air conditioning.
Harrop St: Car-park area to be turned into public space, street closed to through traffic, taxi waiting area to move to upper Stuart St.
Budget: Within $45 million.
Timing: Expected to begin early next year and hoped to be finished within two years.
