South Staffordshire Council had originally rejected the Bloor Homes application for the development at Penkridge Grange, off the A449 Stafford Road last year, but the Planning Inspectorate overturned the decision.
The planning committee originally threw out the plans, despite council officials backing them, due to fears services in the village would not be able to cope with the influx of new residents.
But inspector Zoe Raygen said the plan would help to address the housing shortfall within the Birmingham Development Plan, and 40 per cent of the homes would be affordable.
Ms Raygen said there would be economic benefits to the scheme, including construction jobs, and there would be extra benefits from council tax income and new homes.
However, some councillors had protested the decision, and believe Penkridge has “reached its limits”.
Councillor Isabel Ford, for Penkridge North East and Acton Trussell, said: “We really feel that the infrastructure for Penkridge is already being used up.
“We’ve got good transport links but we’ve really reached our limits now and it is disappointing.”