The development, proposed by Stewart Milne Group Ltd, is set to include business and community facilities.
The group also aims to improved infrastructure, including the creation of a footpath, cycle links to the River Don and a new spine road with access from the A947 Aberdeen to Banff road.
Members of the Council's Development Management Sub-committee voted seven to four in favour of the application at a meeting last week.
Sub-committee vice-convenor Councillor, John Corall, said it was a "highly desirable" development that should regenerate a prominent, not to mention historic, site in the west of the city.
Mr Corall commented: "It will create much-needed and highly sought after housing that will no doubt be attractive to locals planning a move or families looking to set up home in the city.
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"The inclusion of parks and shops, as well as the proposed leisure and community facilities, only strengthens my view that this development will be in high demand."
The Council's Head of Planning and Sustainable Development, Margaret Bochel, said: "The site is zoned for mixed use development in the adopted local plan.
"The redevelopment of the former Davidson's Mill would regenerate a large and neglected part of the city by removing derelict mill buildings and transform a brownfield site into a new mixed use riverside community of up to 900 homes in compliance with development plan policies and Scottish planning policy."
Ms Bochel’s report also said the scheme complied with adopted Local Plan policies and the visions set out in the Aberdeen City and Shire Structure Plan (2009) which has allocated 36,000 houses to the City Council for the period up to 2030, with 15,000 of these properties earmarked for brownfield and regeneration sites.
Approximately 88 acres of land will be developed by Stewart Milne Group Ltd with housing planned for the north and south of Mugiemoss Road.
Some 10% of the housing (90 properties) will be affordable, while approximately 21,500sq ft has been earmarked for retail, leisure and community facilities and around 12,900sq ft for business start-up units.
A riverside park will also be created beside the River Don and the majority of existing woodland will be kept.
In total, about 22 acres of public open space will be created and a feature of the open space will be the retention of the largest of the historic mill's chimneys.
(JG/CD)
