Planners have approved plans to bulldoze the Quality Hotel on Tettenhall Road and build 53 apartments and a student block with 48 flats.
The hotel – formerly known as the Connaught – dates back to the 1960s.
Bosses announced plans in December 2014 to bulldoze the site as it is struggling to cope with its rivals, and this picture shows how the development will look once complete.
Councillor Craig Collingswood, who represents the Park ward, said the development was a 'positive' thing for the city.
"If you look around Wolverhampton it is undergoing a fantastic regeneration across the whole city," he said.
"You have only got to look at Chapel Ash and the development of i10, it is all looking really good.
"What we have got on the Tettenhall Road is the Quality Hotel which is tired-looking, past its sell-by date and certainly needs upgrading.
"That was not viable and the plans have been approved for these apartments.
"As this is one of the main roads in and out of the city, we want something modern-looking that shows off Wolverhampton, so in that sense, it is positive."
However, he added that some residents in his ward have raised concerns about parking.
The hotel as it stands at the moment contains 60 guest rooms on the site as well as accommodation for conferencing, exhibitions, training courses and banquets, with a total capacity for up to 500 people.
Under plans, the student block contains studio apartments with their own kitchen and en suite bathrooms. There will also be a 53-space car park.
Planning documents say that the building requires a 'substantial upgrade and modernisation in order for it to compete in the city's hotel industry'.
Documents add: "A cost benefit analysis has been carried out by the hotel, and the costs of works required to upgrade it and to also make it more energy efficient are not justified due to the age of the building."