Peterborough City Council has voted to allocate £1m towards development of Peterborough United's ground.
The funds will see the London Road terrace become all-seater.
But the council's decision, passed with 45 votes to four, will also enable the long-planned redevelopment of the Moy's End at London Road to go ahead.
And the move brings to an end the ongoing rent disagreement over the council-owned stadium, after Posh had refused to pay last year's rate.
The club sold London Road to a property developer in 2003, who in turn sold it to the council for £8m three years ago.
In the new proposal, the club will reduce its rent from £500,000 to £300,000 per year.
As part of a new 25-year lease Posh's rent will increase to £380,000 per year when the Moy's End work is complete, with construction expected to begin in September, and the council will be due £430,000 a year when both stands are finished, thought to be by the start of the 2015-16 campaign.
Posh will pay the past 12 month's rent at the new rate of £300,000.
The council will reclaim some of the land around the stadium to build houses and the club will have first refusal to buy the ground back over the next 10 years.