Portsmouth City Council's planning committee agreed to grant outline planning permission for the PVD2 Limited scheme for The Invincible - four years after it was submitted- saying it would help attract professionals to the city.
'This is really exciting,' Councillor Lynne Stagg said. 'It fills a gap that we have to help people moving to the city who may not know anyone here. It's a good starting point for them.'
Her comments were echoed by Cllr Linda Symes who said she hoped it would reduce the need for new HMOs.
The planning application proposed the demolition of the disused pub to make way for the block of 76 individual 'bedspaces' which are facilitated by a number of communal areas with shared kitchens and living spaces. It also includes a gym for its residents, but no parking is provided.
Councillors said that being near The Hard Interchange made this acceptable.
A full-time manager would be employed at the building to oversee its operation.
Several objections were filed by residents of neighbouring blocks, concerned the new building would overlook their properties, but no opposition was raised at Wednesday's meeting.
If built, the development would be the first co-living scheme in Hampshire. Similar projects have been progressed elsewhere in the country, including London, Manchester and Brighton but are still rare.
This rarity means it falls outside of current planning rules, meaning no affordable housing is included.
Council planning officers said it also meant the application required a 'bespoke' judgement, particularly as the bedrooms fall below the minimum space standards for typical housing, a provision which prompted opposition from housing officials.
Speaking after the meeting, company director Tom Vail said work would start as soon as final permissions are in place. This includes separate approval from the city council for landscaping arrangements.
'We have been at this for four-and-a-half years - and invested a lot of money in it - so we're keen to progress things as quickly as possible,' he said. 'It's so exciting for the county and city.'
He said there was 'a lot of demand' in the city for co-living accommodation and that the company had 'no concerns' about its ability to fill the building.