Proposals for a 249-house development are to proceed following agreement between developers KPH and Laune Salmon and Trout Anglers Association.
The Anglers Association had opposed the proposal at Cronin's Wood on environmental grounds.
Their concerns included insufficient capacity at the sewage treatment plant in Killarney and the potential effects on water quality in the River Laune and Killarney Lakes.
A statement issued by the association says an agreement has been reached with KPH that resolves its observations.
It says that following discussions, facilitated by Cllr Niall Kelleher, KPH has agreed to install a new storm wate pipe at St Margaret's Road in Killarney.
Laune Salmon and Trout Anglers Association say they had no objection to the houses being built but had concerns about the potential environmental impact on already very poor water quality.
They thanked Kenmare Plant Hire for being proactive and engaging in resolving the matter, and called on Irish Water to undertake an immediate upgrade of the treatment plant to ensure it is sufficient to meet the growing needs of Killarney Town.
KPH say their commitment to solving the housing crisis in a sustainable manner is unwavering and that this demonstrates that commitment.
