Critics say the 198 new homes on Ludborough Road would be completely isolated from the existing village.
The new development would increase the number of homes in the village by 40 percent at once.
There were also accusations of overcrowding, with the site only approved for 130 homes in East Lindsey’s local plan.
The scheme by Cyden Homes had previously been sent back to the drawing board in July.
Despite vocal opposition from some of the council’s planning committee, it was given approval the second time around.
Parish Councillor Heather Howard told the committee: “It amounts to a new village backing onto the existing village with no connectivity. There is nothing to enhance residents’ life.”
Local resident Mr Coy told the committee: “Elderly residents who pop to the shop for milk will have to make a two mile round walk.
“Cars will inevitably ferry children to school, exacerbating congestion outside school gates. This is a car-dependent development, not in keeping with rest of village.”
It was suggested that a footpath could be built along Ludborough Road, giving residents a safe route to walk.
However, there were concerns that this would make the lane dangerously narrow for buses and fuel tankers.
Councillor Terry Aldridge recommended that plans were refused, saying the school would be unable to cope with the influx of new children.
The majority of members found the plans were sufficiently improved.
Councillor Neil Jones seconded the proposal to approve plans, saying there had been “a lot of work by developers” to make it more acceptable.
Steven Ibbotson of Cyden Homes promised that the redesign following consultation with local residents would see fewer homes built on the boundary.
“This will provide much needed housing for North Thorseby and East Lindsey in a sustainable location, supporting infrastructure in the village,” he said.
However, he defended the volume of homes, saying: “In all forms of life, we should be as efficient as possible. Otherwise, it is poor design and poor planning.”
Cyden Homes will make a contribution of £1.2m to local schools, which could be used to create an access gate for pupils on the new estate.
It was also recommended that a footpath be added to the north of the development at a later date.
The final vote was seven councillors in favour, three against, and two abstaining.