The redevelopment of Northgate House - on the corner of Cornmarket Street and Market Street - was waved through by city councillors last night for the second time after it was called in over fears the building would be too tall.
But council planners, alongside applicants Jesus College, described the new design and 'gatehouse' as a 'focal point' to bring people back into the area around Oxford's famous Covered Market.
Jesus College principal Nigel Shadbolt said: "We think this is a unique opportunity to bring about the reanimation of Market Street and nearby Covered Market which is very much needed.
"It [the gatehouse] clearly is a focal point and what we are trying to do is help bring people back into the area which is suffering from poor footfall, back to the Covered Market - as well as giving us a new vantage point."
The plans would see the existing building completely redeveloped to include retail units within the lower levels and above that 68 student rooms, plus the 'gatehouse' providing teaching rooms or public exhibition space.
The project was previously approved last month but called in for a second opinions when 14 councillors raised fears about the highest point of the building sitting at 21.3m - 3m above city centre height restrictions set out in the local plan.
But Oxford City Council planning officer Andrew Murdoch told councillors to height restriction was out of date and has been exceeded by many other city centre buildings - including Varsity Club, Burger King and Debenhams.
He said: "We feel it sits comfortably in that setting and all significant spires in that area are still visible.
"Yes it pops up above the horizon but all the main spires such as Carfax and Tom Tower are all still part of that view - it doesn't disrupt that."
He added that it is a 'sensitive design' that fits in with the area.
But objectors argued the 'gatehouse' would not fit in with its surroundings as it would sit taller than many of its surrounding buildings. City councillor Michael Gotch said: "If it comes down by three metres all the college will be loosing is one room, and nothing lost to the market site.
"It would help things is it was a spire but as it is it is just one grade."
But applicants responded by saying the focal 'gatehouse' is hoped to help open up Market Street and provide a space that can be used for teaching or public exhibitions or events.
Sir Nigel added: "The proposal is a fundamental part of our strategic plan. We envisaged a transformative development of the Northgate that gives us fantastic accommodation, helping take pressure off the housing stock in the city."
Supporting the application city councillor Christine Simm said: "[In comparison with the other city centre buildings] it doesn't seem to be stepping out of line.
"I think it will enhance that part of Cornmarket hugely and open up Market Street making that area more of a destination, because the Covered Market needs it."
The plans, which were put to the Oxford City Council planning review committee on Monday evening, were passed by six votes to two.