The embattled Barking Riverside project, one of the most critical regeneration sites in the Thames Gateway, is to move forward after the government approved an extension to the Docklands Light Railway.

Building has learned that communities minister David Miliband has given the green light to the extension, which is due to run through the scheme.

Miliband approved a funding allocation for the Beckton-to-Dagenham Docks extension after a meeting with Barking and Dagenham council representatives last week.

The future of Barking Riverside, which is being developed by Bellway and English Partnerships, looked shaky last year when London mayor Ken Livingstone refused to back it without transport infrastructure.

On line: Barking Riverside is set to benefit from the DLR extension

On line: Barking Riverside is set to benefit from the DLR extension

Sid Kallar, the lead member for regeneration at Barking council, expressed confidence that the DLR extension, which will have three stops, would now be delivered.

Clive Wilding, the project director for Barking Riverside, said that negotiations on the DLR extension were "moving in the right direction".

Barking council has been putting pressure on the government to approve the extension by threatening to veto any attempt by Bellway and EP to water down the density on the site. Dutch practice Maxwan's masterplan stipulates densities of up to 240 dwellings per hectare for the former power station and landfill site.

The DLR would be a positive move for the Thames Gateway

Ken Dytor

Bellway and EP are planning to build 10,800 homes on the 180 ha site, which contains 2 km of Thames riverside frontage and is one of the main sites for delivering housing in the Gateway. A rail connection to the site is seen as vital for delivering Maxwan's density levels.

Barking's ruling Labour group is facing a strong challenge at the upcoming council elections from the British National Party, which is mustering support on the back of local concerns that the Gateway plans will increase immigration into the area. The DLR extension would be seen as evidence that the regeneration scheme will benefit the area by bringing better services.

Developer Ken Dytor, whose company Urban Catalyst retains a stake in Redrow Regenerations' Barking scheme after selling it earlier this year, said: "The extension of the DLR to Barking would be a very positive move in terms of the Thames Gateway as a whole."

He said approval for the DLR would be a cost-effective way for the government to answer claims that it is not prepared to invest in the Gateway's infrastructure.

A Bellway spokesperson declined to comment.