The project near Jedburgh received unanimous support from councillors late last year.
However, it needed Scottish government clearance due to flooding issues flagged up by the Scottish Environment Protection Agency.
It has now confirmed it does not intend to intervene, allowing Scottish Borders Council to give the green light.
About 50 jobs could be created by the two-phase development being proposed by Mossburn Distillers at the former Jedforest Hotel.
The first phase of the development between 2017 and 2018 would see a small distillery built to educate visitors in the "craft of making spirit".
A larger-scale distillery, capable of producing millions of bottles per year, would be completed by 2021.
The Scottish government has cleared the way for a planned £40m whisky distillery in the Borders to proceed.