The development, more than three years in the making, was voted through by Wealden councillors on Friday.
The scheme will see the construction of two housing estates, Upper and Lower Hellingly,
with 327 houses and 73 flats. Of those, 120 would be classed as affordable housing.
It will also include a community hall, sports pavilion, commercial space, the revamp of the cricket pitch and tennis courts and the building of a new community park with woodland, parkland, play space and footpath network.
New roads, car parking and landscaped areas will also be built.
Officers praised the layout of the scheme and the 'attention
to detail' given to the 'locally
distinctive' design of the houses.
Members of the Hellingly Community Park Trust, who backed redevelopment of the hospital site, broadly welcomed the scheme but some local
district councillors sounded notes of caution.
Cllr John Blake said the lack of provision for a school was a 'big gaping hole' in the scheme and urged East Sussex County Council to reconsider its decision not to press for a school to be included.
He added there were insufficient recycling facilities, a lack of parking for users of the community park and warned the design of the houses did 'not meet the
climate change agenda'.
Cllr David White, who also chairs Hellingly Parish Council, agreed a school should be
included to help meet local demand.
He said, "When we granted
outline consent for this site, we insisted a primary school should be included.
"For reasons best known to themselves, County has decided not to have a primary school.
"We don't have the capacity in Hailsham schools at present to cope with this development."
Cllr White added the roads in the scheme should be adopted as publicly maintained to prevent the estates from becoming
'private'.
Cllr Barby Dashwood-Hall, who initially fought the building of houses on the site, said she would now throw her weight behind the scheme.
She said, "I spent a long time fighting residential development on this site but I accept now I have lost the war."
Officers assured councillors their concerns could be addressed through planning
conditions and the scheme was overwhelmingly voted through.
Hellingly Hospital closed in 1994 and a number of developers submitted applications to build on the site.
Gleeson put plans for 400 homes on public display in April 2005, but later sold the 63-acre site on to Charles Church.
There are however still doubts as to when building work might begin. Charles Church's parent company Persimmon last month announced it would not start work on new sites that are not yet underway, due to the difficult financial climate.