The former Thatched House Tavern in Elmore Green Road, Bloxwich, was converted into a Nisa convenience store without permission in 2017.
But Walsall Council has now granted owner Gurjpaul Singh permission to continue trading. Mr Singh has also been given consent to convert the upstairs of the building into two flats, and to build a first-floor extension to create a third home on the site.
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The pub dates back about 150 years, and is located in the Elmore Green conservation area. Once notorious for illegal cock fighting, it closed in 2012 and fell into a state of disrepair until it was converted into a supermarket.
A statement on behalf of Mr Singh said: “A project which creates both additional housing in a sustainable location and improves the appearance of the local landscape, should be supported and encouraged.”
The applicant added that the scheme would preserve the historic building.
Head of planning Michael Brereton approved the application, but imposed a condition that the shop must close by 10.30pm.
