The 260-foot white knuckle Star Flyer is being relocated to the Tower Festival Headland after talks between council officers and the ride's operators.
The move followed a crisis meeting when Town Hall chiefs ordered the huge structure to be dismantled because of concerns it was too big for its original site in St John's Square.
It is now being shifted to the Headland in front of the Tower, next to the 40-metre long Promenade Ice Rink which is the centrepiece of the resort's Christmas By The Sea Village and is free to use.
A council statement released today said: "We have been working with the ride’s operators to find a suitable alternative site.
"We are pleased to be able to announce that this ride will now go ahead at its new location - the Tower Festival Headland.
"The ride will be positioned next to the ice rink and will give the rider spectacular views across the town.
"It’s new position will compliment the Winter Garden’s Wonderland and Christmas By The Sea village and all the wonderful Christmassy things they have to offer to all our residents and visitors."
Work began today to erect the ride in its new location. It has not yet been announced when it will open to the public.
The Star Flyer is almost half the height of the Tower. But when it was built in St John's Square this week council officers admitted they hadn't realised how big it would be.
“We had received no technical specification for the ride prior to its arrival," said a spokesperson.
"When it arrived in the square, it was clear the overall footprint would have increased significantly when vehicle mitigation measures (safety bollards), which are always required for these sort of attractions, were put in place.
“Hence the view was taken that it would not be safe to operate so close to what is a public highway.”
Blackpool Promotions, the firm responsible for bringing the white-knuckle ride to the resort as part of the Winter Gardens Wonderland festivities, said the setback would delay the opening of the markets.
“We hope to open very soon and will keep you all up to speed on the latest opening dates/times, ” it said.
“We remain committed to creating the best possible experience for everyone in Blackpool and the many thousands of visitors to the resort this Christmas.
“We are more than confident that the Winter Gardens Wonderland will be a huge success and it will still be a magical experience for everyone involved.”