At 323 metres tall, the six-star hotel, designed by London-based Wilkinson Eyre, will be Australia's tallest tower.
It will include 388 rooms, 700 apartments and a publicly accessible restaurant and lounge at the top.
Crown and Schiavello will invest up to $100 million in tourism and public amenities to benefit Southbank as a condition of the approval.
Crown already has three Southbank hotels, all of which are at more than 90 per cent capacity, and the new hotel will boost the company's rooms in Melbourne to 2,000.
Around 3,000 direct and indirect jobs are expected to be created during the tower's construction.
The hotel is expected to generate more than 1,000 new direct and indirect jobs on an ongoing basis, adding to the 10,000 already working at Crown Melbourne.
The design includes a sculptural pedestrian link that will provide an all weather access from the hotel to Crown Melbourne integrated resort.
The project remains subject to financing.
One Queensbridge will be just 10.5m taller than the Gold Coast's Q1, which stands at 322.5m, which is currently Australia's tallest tower.
Crown finished trading today up 0.62 per cent at $11.29 per share.
Business News Australia
Get our daily business news
Sign up to our free email news updates.
Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support