Since the closure of St Aubyn's School in Rottingdean, Brighton, in 2013, its listed main building and chapel have stood empty and unmaintained just off the town's high street.
Developers Fairfax Acquisitions Ltd plan to convert various buildings on the campus, including the main building and a line of terraced cottages, into 41 new homes.
In addition, 52 more would be built on 1.1 hectares of the former school playing fields, with the remaining 1.3 hectares given to the public for use as open space.
Brighton and Hove City Council granted planning permission for the scheme in February despite fierce opposition from some residents.
Local campaign group, Safe Rottingdean, mounted a judicial review challenge to the council's decision, but has now had its complaints rejected.
High Court judge, Sir Duncan Ouseley, said the council had properly balanced any harm caused by the project against its "very significant" public benefits.
The council based its decision on a planning officer's report that conversion of the existing buildings would ensure their preservation.
That was "a significant heritage benefit" and building on part of the playing fields was "required to achieve a viable and deliverable scheme," the report stated.
The project would help to meet local housing needs and yield "a very clear enhancement to the appearance and character" of the Rottingdean Conservation Area.
The officer acknowledged that the playing fields were valued by local people as a "green lung" dividing historic Rottingdean and more recent suburban development.
But he advised the council that the "clear harm" to the setting of the conservation area was outweighed by the public advantages of the scheme.
Fairfax's proposals were ultimately approved by the council's planning committee by nine votes to one.
Safe Rottingdean claimed councillors had been "misled" by the officer's report and were not told that the proposals conflicted with local planning policies.
They were not informed that "considerable weight" had to be given to the impact of the development on heritage assets, the campaign group argued.
But Sir Duncan said it would have been "irrational" of the planning officer not to give "significant weight" to the benefits of the scheme.
It was "obviously the case", he said, that any harm to the conservation area "was not as significant as the benefit to the building and its setting."
The officer gave "special attention" to the desirability of preserving the character and appearance of the conservation area.
But the project accorded with the local development plan and councillors were justifiably told that its benefits "were far more significant than the harm," the judge said.