The Trump administration has issued a presidential permit to pipeline builder TransCanada to build the Keystone XL pipeline.
White House press secretary Sean Spicer tweeted that President Donald Trump would discuss the pipeline later.
The State Department said it determined that building Keystone serves the US national interest, the opposite conclusion to that reached by the department during the Obama administration.
The State Department said it considered foreign policy and energy security in making the determination.
The permit was signed by Tom Shannon, a career diplomat serving as undersecretary of state for political affairs, after secretary of state Rex Tillerson recused himself due to his previous work running Exxon Mobil.
Keystone will carry tar sands oil from Canada to refineries on the Texas Gulf Coast.
The decision clears the way for the $8bn project to finally be completed.
It caps years of fighting between environmental groups and energy industry advocates over the pipeline's fate that became a proxy battle over global warming. It marks one of the biggest steps taken to date by the Trump administration to prioritise economic development over environmental concerns.
The State Department, responsible for reviewing the project because it crosses an international border, reached its conclusion over the pipeline serving US national interests following a review of environmental, economic and diplomatic factors, it said.
It wasn't immediately clear what, if anything, had changed since the State Department reached the opposite conclusion two years ago.
TransCanada, the Calgary-based company that first applied for a presidential permit in 2008, called the decision a "significant milestone."
"We greatly appreciate President Trump's administration for reviewing and approving this important initiative," said TransCanada chief executive Russ Girling. "We look forward to working with them as we continue to invest in and strengthen North America's energy infrastructure."
The 1,700-mile pipeline would carry oil from tar sands in Alberta, Canada, to refineries along the Texas Gulf Coast, passing through Montana, South Dakota, Nebraska, Kansas and Oklahoma. It would move roughly 800,000 barrels of oil per day, more than one-fifth of the oil Canada exports to the US.
Yet even with a presidential permit, the pipeline still faces obstacles, most notably the route, which is still being heavily litigated in the states. Native American tribes and landowners have joined environmental groups in opposing the pipeline.
TransCanada said it would continue engaging with "neighbours throughout Nebraska, Montana and South Dakota to obtain the necessary permits and approvals to advance this project to construction."
Oil industry advocates say the pipeline will improve US energy security and create jobs, although how many is widely disputed. Calgary-based TransCanada has promised as many as 13,000 construction jobs, 6,500 a year over two years, but the State Department previously estimated a far smaller number. The pipeline's opponents contend the jobs will be minimal and short-lived and say the pipeline won't help the US with energy needs because the oil is destined for export.
President Donald Trump has championed the pipeline and backed the idea that it will prove a job creator. In one of his first acts as president, he invited TransCanada to resubmit the application to construct and operate the pipeline. He had given officials until next Monday to complete a review of the project.
Portions of Keystone have already been built. Completing it required a permit to cross from Canada into the US.
Environmental groups also say the pipeline will encourage the use of carbon-heavy tar sands oil which contributes more to global warming than cleaner sources of energy. President Barack Obama reached the same conclusion in 2015 after a negative recommendation from then-Secretary of State John Kerry
In rejecting Keystone, the Obama administration argued it would undercut US efforts to clinch a global climate change deal that was reached weeks later in Paris.
The Trump administration has dropped fighting climate change as a priority and left open the possibility of pulling out of the Paris deal.