Lake Macquarie council has approved an IGA supermarket on Northlakes Drive.

The application was lodged in January, but it stalled in July when the council served GWH Build with a $474,000 bill to cover development contributions.

The fee represented almost half the total cost of the $1.065 million development.

Cameron Park residents, who have to leave the suburb to do their groceries, were dismayed to hear the development would most likely not proceed.

After GWH Build complained the fee was too steep, the council asked the company to provide evidence for a reduced amount.

The initial contribution was levied based on the number of daily vehicle movements the development was expected to generate.

The supermarket was estimated to attract 726 vehicles daily, however, GWH Build conducted a traffic study that showed 95 per cent of these would belong to Cameron Park residents.

The council reduced the fee to $29,000 after the report deemed extra infrastructure, such as bus shelters and upgrades to surrounding roads, were unnecessary.

Cameron Park Community Association organiser Pat Mitchell said residents were "over the moon" to hear the supermarket would go ahead.

"We can finally have a convenience store that's accessible from within Cameron Park," Mr Mitchell said.

"[The association] still has a lot to talk about, but we can now move on from this."

The supermarket plans include a bottle shop and a 26-lot car park.

Work is expected to start by the end of the year.