The authority had already refused planning permission for the development at Sondes Place Farm in Westcott Road in Dorking.
But a Planning Inspector, appointed by the Secretary of State, has overturned the decision.
The proposed development includes plans for up to 144 dwellings, a school drop-off and pick-up area and gypsy and traveller pitches.
The Inspector acknowledged the potential harm to the Green Belt, but weighed the lack of housing delivery in the district, and the consequential shortfall in affordable housing provision so significantly, that he deemed the development permissible.