Buildings at the former Roundway Hospital in Devizes, including the chapel, nurses' home and laundry, are to be knocked down.
Members of Kennet District Council's planning and development committee on approved their demolition last Thursday, so clearing the way for the site to be developed.
Members of Roundway Parish Council had lobbied to save the chapel and the nurses' home, which they thought would make a community hall and flats.
The first application, in the name of Health Secretary Alan Milburn, was turned down by a Kennet planning sub-committee last month but the NHS's consultants, GL Hearn Planning, resubmitted it and it was considered by the full committee on Thursday.
Coun Jim Thorpe referred to the historic mistake when plans to build the proposed new Devizes hospital were moved off the site, allowing residential development there.
He said his main concern was that the building of community facilities on the site wouldn't happen, despite contributions of £50,000 each from the developers of Wayside Farm, Brickley Lane and Drews Park Village.
He said: "When we talked about the redevelopment of the hospital we said we didn't want to create a new Jump Farm, with nothing there except promises.
"Now we are looking at up to 350 homes without so much as a shop between them. We are doing exactly what we said we'd never do again."
Coun Ray Taylor welcomed the fact that some of the former hospital buildings, including the large annexe, the engine house and chimney, were not to be torn down but he had no problem with the demolition of the others.
He said: "The buildings proposed for demolition are without any merit and should be demolished. There is no reason why the chapel should be retained. A potential site for a community centre has been identified and it is feasible to build new community facilities that would be far better than the chapel."
The demolition proposal was passed by a large majority, as was an accompanying one for outline permission for 183 homes on the site, conversion of the retained buildings and the creation of roads and open spaces.
An amendment by Coun David Watson to force the developers to spread the proposed 43 low-cost homes for rent on ten different locations around the development was defeated.
Coun Alan Wood said a ghetto would be created by putting all the low-cost homes in just two areas of the site.
A plan to limit the number of accesses directly onto Green Lane to 15 and the access on to Pans Lane to one was generally approved.
A plea from residents of Drews Park Village, on the southern part of the Roundway Hospital site, asking to continue to use their access on to Pans Lane after the building of the new development, was turned down.
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