Southampton City Council this week approved the 34,000m2 store and a warehouse on the former Pirelli site in West Quay Road.
The firm tried to open a store on the edge of the city at Millbrook in 2004 but the scheme was called in. The council said the latest development would be a huge economic boost to the city, creating 500 jobs.
Cabinet member for environment and transport Gavin Dick said: "IKEA will be a draw not just for local people but shoppers right across the south of England."
IKEA UK manager Peter Hogsted added: "City centre locations give us the opportunity to open stores that are truly accessible." The company will contribute to local amenities through a section 106 agreement.
The application will now go before the government for final approval. The decision comes a month before IKEA opens its first city centre store in Coventry.