After months of deliberation, Mr Garrett said yesterday that the revised plans for the project by restaurateur Neil Slater would not affect the heritage-listed lighthouse.

The decision means the proposal does not need further federal environmental assessment.

Mr Garrett refused a development proposal for the site last May, after ruling it would have an adverse effect on the heritage values of Nobbys lighthouse.

"The main difference with the new design is that it no longer features the glass restaurant surrounding a large area of the lighthouse which was going to impact on its heritage values," he said.

"As I said last year when I refused the proposal, I am not against development of sites such as Nobbys, however, it's important that any development of this site doesn't compromise the heritage values of the lighthouse."

Mr Slater said Mr Garrett's decision represented a significant step forward.

"It's one step closer in a long, long road," he said. "We are getting ever closer to what can be done at Nobbys but there's still a big question mark about how viable what's left can be."

Development plans are expected to be lodged with the State Government and Newcastle City Council within the next month.

Heritage activist Doug Lithgow said he hoped the Government and the council would assess the proposal as a private development.

"This proposal still affects the heritage values and it is really important that it be properly assessed," he said.

"We are relying on the State and local governments to bring the development forward properly this time, not as a Crown development, as they did last time."