The town council in Killarney, Co Kerry, has zoned more than 95 acres for housing in the Flesk river valley along the town's southern edge.
The decision was taken in spite of objections from the spatial strategy unit of the Department of the Environment, which asked the local authority to rethink the proposal. It said there was already "an oversupply" of residential zoned land in the town.
The spatial strategy unit also said the rezoning was a variation on the town's development plan.
The lands zoned on Monday night are for medium and low-density housing, and will provide up to 1,000 extra houses.
An additional 100 acres in the valley have been zoned for special amenity, tourism and agriculture.
An Taisce said the residential zonings were "premature" and represented "unsustainable development" because of a lack of proper access and the distance from the town, schools, shops and other facilities.
The National Roads Authority (NRA) "strongly advised" against the "unacceptable" proposals, saying the cost of land needed for a proposed link road would increase "significantly" if the zonings went ahead.
However, town clerk Michael O'Leary defended the council's proposal. While "theoretically" there was enough zoned land, "in reality a lot of that zoned land is not coming on to the market and is not available for housing".
Senior planner Fiona O'Sullivan said yesterday that only one housing development, the first in some time, was currently under way within the bounds of Killarney town.
The proposal for more housing land is part of an action plan for the Flesk valley drawn up after a motion from town councillor Brian O'Leary (FF) seeking that a parcel of land be rezoned.
Most of the lands were designated "unformulated" as they were county council lands which came under the remit of the town council when the town's boundaries were extended in recent years.
Concerns were expressed that the Mill Road area, a narrow road operating as a link road, was already a rat-run given congestion on the main national park link road.
The NRA warned that rezoning so much land as residential would push up the price of land needed for a link road, whose route was not yet finalised.
Sophie Elabdaly of the authority said: "Such proposals, while potentially bringing major financial gains to the property owners involved, would be at variance with the broader public interest."
She said the zoning, by increasing the cost of land that the authority had to purchase, would reduce its funding for road works and improvements.
However, town clerk Mr O'Leary said the lands zoned for housing could only be accessed from the existing Mill Road.