The Environment Court has approved Queenstown Lakes District Council plans to rezone 14.5ha of land near Skyline's gondola, allowing buildings up to seven storeys high.
Most of the area will change from high-density residential to Queenstown town centre zone.
That includes the controversial Lakeview site earmarked for a $70million convention centre.
The court's decision for plan change 50 (PC50) confirms housing and visitor accommodation should be priorities ahead of a convention centre.
But council chief executive Mike Theelen was not fazed.
He said: "PC50 will create new development opportunities for the Lakeview site and the other land included in the PC50 area.
"It gives the council greater flexibility to pursue the development of the convention centre.''
The rezoning includes Lakeview and its surrounds all the way across to the fire station on Camp St and down as far as Crown Plaza hotel on Beach St.
Town centre zoning allows the land to be used for houses, hotels, offices, bars, restaurants and shops, but not big-box retail.
Mr Theelen said the council was pleased with the decision, although there was still an appeal period to run.
"Once that has finished, the council will consider formally making the PC operative.''
Five parties had appealed the decision of independent planning commissioners to the Environment Court.
Council reached agreement with them before and during the April hearings.
Those agreements were combined into a single document for the court's consideration.
The court itself suggested changes to the text of the plan change, including ranking housing as a higher priority than a convention centre.
Judge Jon Jackson also wanted to hear evidence the objectives of the district plan would not be undermined by PC50, in particular the visual impact on historic downtown.
Judge Jackson noted "undesirable'' developments in other mountain resorts overseas such as in France and Italy.
"Of course, we also recognise that brutalist architecture has, in many parts of the world, allowed the less well-off to enjoy winter sports.
"However, that is not appropriate in and around Queenstown Bay, as the objectives of the district plan make clear.''
The court was eventually satisfied the buildings - ranging from 4.5m high to 26m, but mostly 12m - would not ruin the look of the town.
The court also removed the term "predominant use'' to ensure large-scale retailing cannot take over the Lakeview site.
With the amendments, the court confirms the decision of the independent commissioners and confirms PC50 complies with the objectives and policies of the active district plan.
