Foundation Theatres on Friday won independent planning approval to build a new "Broadway-style" theatre seating 1550 patrons and a 1000-seat theatre in the Star casino complex.
The space will also house a new 10-metre "fly tower" to lift actors rapidly off the stage as well as new dressing room facilities.
The construction will spell the end of The Star Event Centre, a rooftop facility that can seat up to 3000 people for a variety of events.
It comes after the NSW government committed $40 million from proceeds of a toll road sale to the redevelopment of the Parramatta Riverbank Theatres to allow them to host major productions.
The Foundation Theatres application needed to go before the NSW Independent Planning Commission due to the theatre operator's donations to the Liberal Party and Sydney Lord Mayor Clover Moore.
A three-member commission panel inspected the site and met council and other stakeholders before rubber-stamping the proposal.
"After careful consideration, the commission has determined that consent should be granted to the modification application, subject to conditions to manage and mitigate matters including noise, vibration, construction and traffic impacts," the commission said.
It noted traffic and parking demand would be lower than already approved for the function centre, as maximum approved patron numbers would be reduced.
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