The scheme was originally rejected by Bristol city councillors but Viridor, the company behind the proposals, took its case to a public inquiry last November.
Now the company has won planning permission for the facility at Severn Road, Avonmouth, which will be able to separate large volumes of recyclable material and also process up to 350,000 tonnes of residual waste a year.
The plant will produce heat, which could be used by local businesses, and generate enough electricity to supply more than 45,000 homes.
The company still needs to obtain a permit from the Environment Agency to operate the plant but has begun clearing the site ahead of construction early next year.
Viridor’s business development manager Phil Bines said: "We are obviously extremely pleased with the decision.
"Avonmouth is an important part of our strategy for providing support to local authorities and businesses in the South West to increase their recycling rates. The development also offers an alternative to landfill for the disposal of residual waste."