The proposal, which includes a restaurant, day spa, gymnasium, pool and sauna, was given the go ahead by the Victorian Civil and Administrative Tribunal.

Mornington Peninsula Shire councillors had previously knocked back plans, however, their failure to do so within the statutory 60-day time frame resulted in developers taking the matter to the VCAT.

The shire's manager of statutory planning Ray Webb said it was seeking legal advice before briefing councillors about the possibility of appealing the case to the Supreme Court.

The council has 28 days from October 5 in which to appeal the decision.

As directed by the VCAT, the shire issued a planning permit for the $5million-plus project on Monday, but the developers cannot act until an appeal decision is made.

Objectors, including Kangerong Ward Action Group president Peter Holloway, a neighbour of the planned complex, were outraged at the tribunal's decision, saying it would be the biggest building ever erected in a residential zone on the peninsula and would have profound implications for the southern peninsula's residential zones.

"We believe the tribunal has erred in its legal interpretation of the Planning and Environment Act 1987 and the shire's planning scheme in reaching its decision, which rejected its previous unanimous refusal by shire councillors," he said.

The resort will be built on the corner of Point Nepean Road and Heales Street, opposite a 7-11 outlet.

Tom Tangas, who is leading the development consortium, said it was hoped building would begin after Christmas and take about 14 months to complete using peninsula trades people.

"We own Marina Cove by the Sea and have bought adjacent properties to create a 4600-square metre site on the corner of Point Nepean Road and Heales Street," he said.

Mr Tangas said the project had wide support and would have a five-star environmental rating.