Edinburgh City Council yesterday approved a reserved matters application for the spiral-shaped hotel that would form part of the mixed-use redevelopment of the existing St James Centre.
Outline consent for the wider scheme was granted in 2009.
A planning report said the principle of the development of a hotel at the location had been established in the outline application, but it added that the "proposed building is greater in its form and height than the form established by the outline planning permission".
The report said the building’s proposed form "would have an adverse impact on the City's Skyline" contrary to local planning policy, would "adversely affect the character and appearance of the New Town Conservation Area and would have a detrimental impact on the Outstanding Universal Value of the World Heritage Site".
Recommending refusal, the report said there were "no material considerations which outweigh this assessment".
However, the council's development management sub-committee voted to approve the plans at a meeting yesterday.
Frank Ross, convener of the council's economy committee, said: "I am delighted that this hugely important development for Edinburgh can now move forward.
"Today’s decision is the final piece of the jigsaw to allow this project to transform the East End of Princes Street, and the city centre as a whole, creating thousands of new jobs, in particular targeting those furthest from the job market, and greatly enhancing the capital’s hotel and retail offering".