The biggest building project Baldock has seen for many years is being led by the developer, Urban&Civic, in partnership with the landowner, Hertfordshire County Council.
It will occupy 527 acres (213 hectares) of land to the east of the town.
If all 3,200 homes are built, the housing stock would increase by about 70%.
The scheme will also include:
The project was given outline planning permission, external by North Hertfordshire councillors on Thursday.
Kitty Eyre, the development manager at Urban&Civic, said it was an “important milestone” for the project.
She said: “[It] is the result of several years of detailed work and, most importantly, conversations with the people who know Baldock best.”