The company's application was approved by Redcar and Cleveland Borough Council following a detailed consultation period.
Its application to build another Electric Arc Furnace (EAF), at its Scunthorpe site, is set to be decided imminently by North Lincolnshire Council.
The manufacturer's proposed transformation – its biggest in more than a century of steelmaking – is subject to appropriate support from the UK Government.
British Steel President and CEO Xijun Cao said: "We're delighted to have received planning permission to build an Electric Arc Furnace at our Teesside site, and thank everyone who has supported our proposals to bring steelmaking back to the region.
"The proposed installation of EAFs in Scunthorpe and Teesside is central to our journey to a green future as they would help us reduce emissions of CO2 by more than 75 per cent. However, it is crucial we now secure the backing of the UK Government.
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"Our owner, Jingye, is committed to the unprecedented investment decarbonisation requires and our desire to dramatically reduce our carbon footprint, coupled with challenging market conditions, means it is imperative swift and decisive action is taken to ensure a sustainable future for British Steel.
"We started talks with the UK Government in 2022 about the timely support we require on our journey to net zero, including the need for the British government to adopt the correct policies and frameworks now to back our drive to become a clean, green, and successful company. We are committed to working with the UK Government and need to reach an agreement quickly so we can achieve our ambitious goals, secure thousands of jobs and keep making the steel Britain needs for generations to come."
Significant preparation works, including environmental and technical studies, and equipment selection, are underway to ensure the company’s ambitious proposals can be delivered at the earliest opportunity while discussions with the UK Government continue.
Both proposed EAFs would replace the aging iron and steelmaking operations at British Steel’s Scunthorpe site which are responsible for the vast majority of its CO2 emissions. The company proposes maintaining current operations until a transition to electric arc steelmaking.
British Steel has started preliminary talks with trade unions about electrification, and has promised to support employees affected by its decarbonisation plans.
