Ken Burgess, chairman of the Central Parade Business Partnership, said: "It shows what a complete and utter waste of time that objection was in the first place.
"This is good news. At last we can move forward, which is what everybody wants, so I am hugely pleased. It provides additional shopping facilities for the area which we recognise is desperately needed.
"It is a good parade, but we need additional facilities. It will attract more people to the parade."
The bid to class more of the area as a village green was made by New Addington resident Michael Fuller and supporters.
The council says it received 165 letters from residents and local councillors objecting to the application, and 14 letters of support.
Its corporate services committee refused the bid in February.
The council will now appoint a design team to work with the community to draft the scheme for the area, with that work expected to start next year.
Kirsty Pearce, from community group Pathfinders, said it "very much welcomed" the fact that regeneration was going ahead.
She said: "It has been shown through letters sent in objection to the second village green bid, and from the Facebook page, that the vast majority do welcome regeneration.
"We hope whichever supermarkets bid are listening to local residents and provide a range suitable for what we need.
"We are sure the council will work with and keep residents and local traders involved in as many ways as possible as we move forward.
"This has been so long-awaited and we think the vast majority will want to see building begin tomorrow. So, early involvement and information would be helpful."
Ward councillor Tony Pearson said: "I am very pleased – this is good for New Addington. It is good news that the courts came down on the side of the council."
Tesco has publicly expressed interest in opening a store as part of the regeneration, while other major supermarkets are also understood to be interested.
Councillor Jason Perry, borough cabinet member for planning, regeneration and transport, said: "We're pleased that the courts back our decision and we can now move forward with the community to bring much-needed regeneration and jobs to New Addington."