Mayor of London Boris Johnson has approved Westfield and Hammerson's £1bn redevelopment of the Whitgift Centre.
The joint venture by the two retail giants called the Croydon Partnership, will see the town centre transformed with a 1.5m sq ft development.
Mr Johnson said the new development would create a new "era of prosperity for Croydon and help return it to its former glory."
He said: "Hammerson has an excellent track record and the recent Westfield developments in London created thousands of jobs and attracted millions of visitors, giving others the confidence to invest.
"I am in no doubt that this new development will have a similar positive impact in Croydon and breathe new life and vitality into the town.
"There is no doubt that Croydon can once again become one of London's most vibrant town centres and a major driver of our economy and this development will bring that aspiration one step closer to reality."
The scheme will now be referred to the Communities secretary Eric Pickles.
John Burton, Director of Development of Westfield, said: "Mayor Boris Johnson’s commitment to the scheme marks the completion of yet another major milestone towards the delivery of this project and also underlines the weight of political support there is for this once in a lifetime opportunity, which is fantastic news for the people of Croydon and invaluable to our ability to get the project moving”.
Peter Cole, Chief Investment Officer of Hammerson, added: “We very much welcome the Mayor’s decision to approve our outline application and look forward to working with him and the council to deliver their vision of re-establishing Croydon as the retail destination of South London."
The rival developers had been in deadlock over the redevelopment of the town centre, before agreeing on the 50/50 joint venture that will create an estimated 5,000 new jobs.
Croydon Central MP Gavin Barwell said: "This is the clearest evidence yet that there is unanimous political support for construction to commence as fast as possible.
“Now that the Mayor has given his approval, the application will be submitted to Eric Pickles, the Secretary of State for Communities and Local Government.
"I will be writing to him asking him not to call the application in given it is broadly consistent with national planning policy, the London Plan and the Croydon Plan."
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