Plans to transform a former Wearside brewery site and create 3,000 jobs have taken a step closer.
Tesco and Sunderland arc have different plans for the site
Sunderland's former Vaux Brewery has been the subject of a dispute between regeneration company Sunderland arc and Tesco, which owns the land.
Both have regeneration plans for the site and the government has now approved Sunderland arc's proposals to build offices and hotels in the area.
Tesco is hoping to reach a compromise with the company over the site.
Sunderland arc's plans for the site were approved by the Secretary of State for the Department for Communities and Local Government on Thursday.
Its plans include a £280m development of the site including offices, two hotels, houses and shops.
Tesco wants to build a store, hotel and apartments at a cost of £150m but also said it was drawing up alternative plans, which it hopes will strike a compromise with Sunderland arc.
Emily Taylor, communications manager for Sunderland arc, said: "We are delighted with the decision, but this is just the latest step.
"We want something better for the city - the site is a gateway into the area and we want the development to reflect this. "
Max Curtis, Corporate Affairs Manager for the supermarket, said: "Our aim throughout the whole process has been to make sure that the procedure for determining the proposals is undertaken in an open and transparent manner.
"Alongside this objective, we want to ensure that the best scheme is delivered on the site as soon as is possible which meets the city's employment and regeneration needs."