Councillors approved plans to demolish a high street parade and build a hotel, new shops and student housing.
The planning committee passed through the plans for the refurbishment of the 1920s former Royal Arsenal Co-operative Society (RACS) building in Upper Tooting Road, Tooting, on Tuesday.
Four new shops, a hotel with 83 bedroom and 75 rooms for students will be created, while the art-deco façade of the RACS building, first built in 1923, will be restored.
Owners Barrowfen Properties also want to build a four or five-storey building, which could accommodate restaurants, bars and a hairdresser.
Councillor Nick Cuff, planning committee chairman, said: "This is an exciting and welcome addition to the town centre.
"The opening of a new hotel and the new student accommodation will have a positive effect on other businesses in the area and make a good contribution to the ongoing efforts to revitalise and regenerate Tooting town centre."
The new development also includes a 60 space car park and parking spaces for 62 bicycles, which will be usable for shoppers and visitors to the town centre.
Wandsworth Access Association described the project as "most welcome" while a representative from English Heritage also approved the development.
The building has attracted some attention last year after Hindu worshippers using the RACS as a temple were forcefully evicted from the site.
Businesses also raised concerns about parking possibilities, suggesting that students and hotel guests might limit parking space in the surrounding area.