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Machine Shop 8 will become a leisure centre after planning permission was granted by Medway Council on Wednesday night.
The structure near the Dockside Outlet Centre is a Grade II listed building and was once used as a dry dock cover.
An application submitted by Covell Architects shows plans to repair and stabilise the structure before a new frame is built around it and covered in cladding.
New images show plans for a rock climbing wall and trampoline area inside.
Earlier this year, Peter Everest, boss of the outlet centre, told the Messenger: “We had to do something. We have had some very positive response from planning parties.
“Some say it’s iconic but to me it is an oddity and looks wrong - a bit like in the recession when builders on a building site went bust.”
“I have always believed retail and leisure should work together. With other facilities here at Chatham this make this a great place to spend a day out.”
The application was approved despite 52 comments objecting to the decision based on concerns over parking, anti-social behaviour and the plans not keeping with the “look and feel” of the area.
Miss Sheila Jasper from Gardiner Street, Gillingham, said: “This is an iconic structure that has historic value. We do not need any other leisure centres in this area as there are plenty already.
“To cover this structure is to lose its value. It should remain as is. If a use must be found, why not use it as an open market area with monthly/weekly market stalls.
“The structure would remain intact and for all to see whilst land below would have a function.”
The land opposite the structure will be converted into a car park with 50 spaces and 12 wheelchair/mother and child spaces.