Leamside Care Centre have been given planning permission to build a 60-bed "transitional care centre" to provide rehabilitation care for those needing help to return to independent living following treatment in hospital.
Gateshead Council previously approved a proposal to build an 83-bed care home on the Gretna Terrace site, where Felling Social Club once stood.
But the firm said that talks with the local authority's social services department has resulted in the new plans.
A design and access statement said: "Subsequent discussions and negotiations with Gateshead Council social services department have identified the need for a transitional care unit, resulting in the development of revised proposals for the site."
The 70 jobs created by the new site will go to staff who currently work at local care centres that have been earmarked for closure.
The developer said: "It will be a good neighbour for the adjoining residential properties, will not be a source of any nuisance, and with its 24-hour staffing will improve the security of the area."
The local authority's planning department also backed scheme, saying that the proposals comply with local and national planning policies.
A report to the planning committee said: "It is considered that the proposal does accord with national and local planning policies and the recommendation is made taking into account all material planning considerations including the information submitted by the applicant and third parties."
The council's planning committee voted to approve the proposals on Wednesday.
