A Scottish Executive decision will have to be sought after councillors voted in favour of a housing scheme opposite the former home of Sir Walter Scott.
The council has approved housing on land facing Abbotsford
It took the casting vote of development control committee chairman Bill Smith to approve the Netherbarns plans.
The 79-house proposal will now go to the executive because of its proximity to A-listed Abbotsford House, near Melrose.
Campaigners hope that ministers may yet overturn the decision.
Historic Scotland, Scottish Natural Heritage, the National Trust for Scotland and the estate of Sir Walter's descendant, Dame Jean Maxwell Scott, all objected to the plans.
Local campaigners Save Scott's Countryside - led by Nicholas Watson - also wanted to block the proposals by M & J Ballantyne.
Mr Watson claimed the decision went against proposed use of the authority's interim housing policy.
"When the council put this new policy out for consultation they said it would not be used for contested sites," he said.
"Yesterday they used it to approve one of the most controversial sites of all, Netherbarns, smack opposite Abbotsford across the River Tweed."
The development committee was tied at six votes all on the plans when chairman Bill Smith used his casting vote in favour of the scheme.
It will now be up to the Scottish Executive to reach the final decision on whether the housing can be built.