Plans to renovate the derelict building in Longmeanygate, Midge Hall have been approved by South Ribble Council.
The proposal will see the property - next door to The Aurora Brambles School - extended at the side and rear.
An existing detached garage will be demolished to make way for additional car parking.
The property adjoins a new access road for houses being built on the former Leyland Trucks test track in Centurion Park.
A statement to the council's planning department says: "It would be incongruous to create a new access into as prestigious new development only to have an eyesore sat adjacent to that entrance."
It goes on: "The house has not been occupied for a number of years and is effectively bricked up on the windows and doors. The site is overgrown . . . and generally well-screened by trees from all sides."
The scheme will convert the two-bedroomed house, set in its own grounds, into a nursery with two playrooms downstairs and three more on the first floor.
The site is on green belt land, although the land backs on to the former test track development where up to 950 new homes are planned.
The developers say the property next door was granted permission to convert from a farm building to a school in 2009. Four years later a two-storey extension was approved.
At the time the then inhabitants of the now-derelict property objected to the plans saying an 11-classroom private school would have "a negative impact on the value of neighbouring dwellings."