Land Court of Queensland on Friday recommended the expansion of the Darling Downs mine, west of Brisbane, subject to conditions including noise and dust controls.
In what is considered to be the state's longest running mine dispute, New Hope Group has been trying to expand the open-cut coal project for more than a decade.
Farmers and community members with the Oakey Coal Action Alliance (OCAA) objected, citing air quality, dust, noise and climate change issues, and impacts on soil and water.
The verdict will be taken into account by the Queensland government in deciding whether to grant or reject the mining application.
"This is an excellent result," New Acland Mine general manager Dave O'Dwyer said.
"We will continue to work closely with the relevant Queensland government departments to achieve these approvals, which would enable a restart of operations and employment opportunities for hundreds of local workers at the New Acland Mine, as well economic opportunities for the region more broadly."
Land Court member Peta Stilgoe said despite "respecting and understanding" the OCAA's position, the expansion should go ahead because the company had addressed noise and air quality concerns.
"In my view, (New Hope) has more than made up for its initial lacklustre response by spending significant time and money to implement a sophisticated real-time responsive (Trigger Action Response Plan)," Member Stilgoe said in her judgment.
But the OCAA have called for the state government to not grant mining lease or groundwater licence approvals, saying the court had acknowledged the project's noise and dust impact.
"The Land Court judgment today confirmed that the local community has been put through hell by New Hope coal through excessive noise and dust from the mine ruining their lives," OCAA secretary Paul King said.
"This should be enough for the Queensland government to call it a day, and prevent this dangerous, unwanted project from re-opening."
The OCAA said it planned to speak with Resources Minister Scott Stewart and seek stricter conditions for the mine.
The New Acland site exhausted its last supply of coal in late November, with almost 300 workers made redundant from the mine since 2019.
Opposition Natural Resources, Mines and Energy Minister Pat Weir said the Land Court recommendation was a "win for common sense".
"The jobs and livelihoods of hundreds of workers have been hinging on this decision," he said.
"The premier must approve the mine immediately before any more frivolous objections are made."
In February, the High Court ordered the matter be returned to the Land Court for a new hearing.
That followed a five-year legal battle that included a 100-day hearing in the Land Court - the longest in its history - and actions in both Queensland's Supreme and Appeal courts.
The OCAA said the mine's proposed expansion was originally refused on groundwater grounds in the 2017 Land Court hearing.
However, the OCAA claimed grounds for the latest Land Court case were limited by law changes made by the Palaszczuk government that ensured the project's groundwater impacts could not be considered.
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