Outline planning permission has been granted for 600 homes to be built on the outskirts of the town under plans first submitted to Shropshire Council in 2016.
The houses, 60 of which will be "affordable", will be built behind the leisure centre between Shrewsbury Road and the A5/A483 and work is expected to get underway this year subject to planning conditions being met.
It follows two years of negotiations between property consultants Lambert Smith Hampton (LSH), on behalf of developers J Ross Developments, and the council.
The plans include building a link road between Shrewsbury Road and Middleton Road to stop nearby roads becoming rat runs and have in part been made possible by the council receiving a £9.3 million grant to support the upgrading of nearby Mile End and Whittington Road roundabouts.
The developer is expected to contribute around £1.8 million via the Community Infrastructure Levy to fund primary and secondary school provision, play facilities and highways infrastructure.
The 60-acre site which will feature a mixture of family homes built across up to six phases.
Paul Shuker, director of planning, development and regeneration at LSH, said: “This new and sustainable urban extension to the second tier settlement in Shropshire will bring much needed housing to the north of the county.”
Nick Scott, managing director of local company Pickstock Homes, said: “LSH has provided invaluable support to Pickstock Homes throughout the planning process, which has helped to secure this important outline planning permission for 600 new homes in Oswestry.
"As with many strategic schemes of this size the infrastructure requirements, including mitigation works on the A5 trunk road, have been complex and required careful negotiation with the statutory authorities in order to ensure that the final conditions attached to the outline planning permission provide for a viable scheme on which to base our reserved matters applications.
"Pickstock Homes are looking forward to making a reserved matter application in the next few months to deliver the first tranche of residential development on this exciting new site."