Windella residents who campaigned to block a dog and cat boarding kennel in their rural suburb said they were "devastated" by a Land and Environment Court decision allowing the development to go ahead.
At a meeting in September, Maitland City Council refused Ross and Hanneke Chipperfield's application for the kennel despite the business being proposed for an appropriately zoned area.
The Chipperfield plan raised the ire of residents who launched a strong campaign, with 754 petitioners and 170 people protesting against the development.
The decision allowing the development to proceed was handed down last week.
Council development and environment manager David Simm said he would not know the costs of the legal battle until the end of the month. He said there was no right of appeal in the case.
Mr Chipperfield said he was particularly happy with the outcome and hoped his business would be up and running early next year.
He said that under planned changes to the proposal, an exercise yard would be moved from the southern side of the kennels to the northern side, further away from nearby homes.
One of the protesters, Susan Mathews, said the court's decision had devastated residents.
"We're all extremely disappointed with the outcome and we felt that the extent of our opposition would account for something," Ms Mathews said.
She said residents were "digesting the judgment" and no one had given any indication of an appeal.
"But I can't speak for all the residents," she said.