Tararua District Council has given the go-ahead for a brothel to be set up in the main street of Dannevirke.
The decision has been greeted outrage, astonishment and resignation by residents, but the council says the wording of the district plan gives it no choice but to approve the business.
Teresa McGregor, who plans to set up the brothel in the former Public Trust building which she owns, says she is delighted by the decision.
Ms McGregor says she has agreed not to put any offensive or provocative signs on the building.
She says the council's decision will allow her to begin work on restoring the building.