Nearly 400 new homes will be built in Malvern, the council has agreed.
Outline planning permission for development that includes family and starter homes has been granted, with 167 committed to affordable housing.
The development on the former MoD North Site is likely to be the largest mixed use to take place within the district up to 2011, Malvern Hills council says.
The site, at 20 hectares, is ideally placed to provide homes, shops and a school, says the authority.
Malvern Hills District Council negotiated with the developers, Persimmon Homes, that 43% of the housing on site should be provided as affordable homes, to be managed by a housing association.