Standing nearly 140m high, the giant observation wheel – dubbed The Whey Aye in celebration of its location – will be 5m taller than the London Eye.
Hong Kong-based developer, The World Wheel Company, said the project will see up to £100m invested in the city.
Designed by architect Concept I, the wheel and associated buildings will be a destination food and drink experience for Newcastle called The Giant’s Quay.
Cllr Ged Bell, Newcastle City Council’s cabinet member for employment and investment, said: “The idea of one of the world’s biggest observational wheels operating here in Newcastle has captured a lot of people’s imaginations.
“The development has the potential to be a real game-changer, creating hundreds of jobs for local residents and attracting thousands of new visitors, which can only be good for shops, restaurants, cafes and local businesses.
“I am delighted that planning committee have approved these exciting plans. They have listened to all of today’s speakers, and I look forward to seeing this derelict site coming back to life over the coming months.”