The town's landmark Sun Centre was demolished in September to pave way for the regeneration, despite a 300-name petition to save it.
Denbighshire council approved plans for the new leisure facility on Tuesday.
The council said the regeneration would attract 350,000 additional visitors to the town every year.
Plans include the building of a new water park, climbing facilities, an outside splash pool, sun lounger areas, cafe terraces and a bar.
As part of the redevelopment Rhyl's skate park and paddling pool will be moved.
The council said it would consult with young people on the design of the park.
Subject to planning permission, work will begin in September 2017 and the new facilities will open in early 2019.
Denbighshire council leader Hugh Evans said the approval was a "significant milestone" for the project.
He added: "Developments and improvements to the promenade aim to not only benefit Rhyl's economy through increased footfall from visitors, but also let the communities of Denbighshire and wider north Wales region know exactly what the town has to offer."
Plans to build a new water park in Rhyl in a bid to rejuvenate the area's promenade have been approved.