Llandysul's Awel Deg shut in May 2014 with 40 staff made redundant after issues were raised.
Plans to turn it into a dementia care unit were unveiled in July 2015.
The local authority's cabinet has looked at options for the site and supported creating an integrated health and social care hub.
This would see a 24-hour base for mental health, dementia and learning disabilities services being created at the site.
Council and health board staff will now develop more formal proposals.
A home closed over care standard concerns could reopen as a mental health and dementia centre after Ceredigion council supported the move.