South Hams District Council and Plymouth City Council have now granted permission for the first phase.
Leader of South Hams District Council John Tucker said: “This advanced step in planning approval is a milestone which marks the real beginning of Sherford as a town, bringing much needed housing and jobs to the area.”
The 5,500-home Sherford town will now be constructed by Red Tree, the project founder, and a consortium of developers including Taylor Wimpey, Linden Homes and Bovis Homes.
The project also has been supported with an investment of up to £32m from the Homes and Communities Agency allowing key infrastructure to be built.
Over the course of 15 years more than £1bn will be ploughed into the South Hams district scheme.
Sherford has been on the stocks for a long time with original plans dating back to the 1990s.
The new market town is the fifth large-scale site that the government has helped to accelerate since August last year.
Taylor Wimpey using consultant Aecom and architect CMYK Planning and Design is understood to be leading the first homes at the site.