The work was held up earlier this year when railway bosses were told they needed planning permission to carry out the work at Bolton Abbey station.
Officers at Craven District Council have now given retrospective permission to retain the present line and to construct a further extension.
Stephen Walker, the railway business manager, said: “We’re delighted with the news. It means we can now get on an compete the work such as constructing a crossing barrier and improving the fencing.
“That should be completed this year and we can then get on and complete the second phase which will take us down to the bottom of the car park, a considerable distance.”