The hospital has been vandalised since it closed in 1995

Two months ago, councillors rejected official advice and turned down planning permission for the North Wales Hospital site.

But a full council meeting on Tuesday overturned the decision and backed plans for 280 new homes, business and community facilities.

The developers welcomed the move saying it would boost the local economy.

Councillors had earlier been warned in a report that the authority could face costs of up to �150,000 if the developers won an appeal.

Last year Prince Charles, visiting the site for his restoration scheme the Phoenix Trust, said the prime example of Victorian asylum architecture, was in danger of being "squandered".

Since its closure 10 years ago the Grade II-listed building has fallen into disrepair and been vandalised, although several schemes have been mooted for its redevelopment.

This development will be a much-needed boost for the town of Denbigh and the Vale of Clwyd Developers Acebench Investments

The latest proposal by Lancashire-based Acebench Investments is to build 280 homes on the 120-acre Denbigh site, together with small businesses and community facilities.

In March, members of the planning committee voted narrowly to dismiss the application, warning of its possible effect on the Welsh language and culture and saying the proposals were "too vague".

But councillors voted by 29 to 8 with three abstentions in favour of the scheme at their meeting in Ruthin on Tuesday.

Acebench welcomed the decision saying it would open the way for the renovation of listed building at the site.

Landmark building

In a statement after the decision, the company said: "This development will be a much-needed boost for the town of Denbigh and the Vale of Clwyd, bringing jobs and prosperity through a local-based partnership.

"The mix of employment, homes and environmental improvements as well as the restoration of a landmark building will encourage considerable investment".

But opponents of the development warned their opposition to the scheme would continue.

Dr Gwyn Thomas, chairman of the North Wales Hospital Action Group, said the local authority had been forced to make the decision because of warnings about possible legal costs if the developers went to appeal.

He said the group would be consulting its solicitors about the possibility of seeking a judicial review.