The redevelopment of the famous factory will see existing buildings converted into 46 two-bedroom flats, along with accommodation for 100 students.
Now Nestlé will begin the task of finding a developer to buy the land and take on the ambitious scheme.
The York site has been associated with the manufacture of confectionery since 1890, and the planning application is centred on buildings which were developed up until 1940.
A total of 166 two, three and four-bedroom homes are planned for the site as well as a 55-bedroom care facility for the elderly.
Nearly 108,000 sq ft of office space and more than 10,000 sq ft of retail space will also be built as part of the redevelopment scheme.
The redevelopment of the southern half of the site will help the firm invest further in its York operations, and is seen as key to safeguarding the future of the remaining 1,800 employees.
Nestlé’s business services director, Dave Bruce, said: “We’re highly delighted with the decision and this development is going to be good for the people of York.
“It will create housing, including affordable housing, student accommodation, office and retail space and an excellent range of facilities, as well as about 600 jobs during construction and some more jobs within the site itself once it is completed.