Police had appealed to magistrates not to grant the licence for the five-day Stokes Bay Festival.
But the festival organisers have now agreed to a raft of conditions such as limiting numbers to 2,500 people each day – 500 less than previously per
mitted – and locating the big top at least 245ft away from homes.
No alcohol will also be allowed to be taken on or off the Bay House School playing fields, off Military Road.
However the conditions haven't pleased residents who say their peace will be shattered when the festival – featuring bands including the Proclaimers and The Zutons – gets under way next month.
Elaine Roberts, 54, of House Farm Road, Gosport, said: 'I'm just devastated. This is just going to have such a big impact on our lives.
'The noise is our biggest concern – we bought a quiet residential home and it's not going to be that while this festival is on and I'm honestly sickened by this.'
Jacqueline Greenhalgh, 56, also from House Farm Road, added: 'We are going to have to live with the site being set up, the music taking place, then the site coming down and it will just be 15 days of misery.
'We are going to be bombarded by noise and it's being imposed upon us – it's not something we want.'
The festival is due to take place from July 29 to August 2 and will also feature the Saw Doctors and Seth Lakeman.
Festival organiser Peter Chegwyn – also a Gosport councillor – said: 'We are absolutely delighted that the festival is going ahead.
'It will bring a lot of money into the town and provide local businesses with a much-needed boost.
'We will work with residents to ensure that any concerns they have will be addressed.'