The 1 billion pound ($1.6 billion) resort project was rejected by local authorities in Aberdeenshire last year, because part of a golf course is to be built on habitat of rare birds and other wildlife.
After the local council's decision, the Scottish government took the unusual step of agreeing to review Trump's application.
Issuing the government's final decision Monday, Scottish Finance Secretary John Swinney said the resort was of "great economic and social benefit" to the country.
Trump, whose mother was born in Scotland, said in a statement that the resort would be a "tremendous asset and source of pride for both Aberdeenshire and Scotland."
"As I have often said, because of the quality of the land we are given to work with, we will build the greatest golf course in the world," he said.
The resort is expected to have two championship courses, a 450-room hotel and 500 luxury houses.
The Aberdeenshire Council rejected the resort late last year after local residents and conservationists said a course should not be built on a stretch of shifting sand dunes that are home to some of the country's rarest wildlife, including skylarks and otters.
That area had been previously protected from development.
But local business leaders, tourism agencies and Scotland's nationalist First Minister, Alex Salmond, supported the development, which could bring much-needed jobs and money to the area.
"The economic and social benefits for the northeast of Scotland substantially outweigh any environmental impact," Salmond said Monday. "In tough economic times, substantial investment of this kind is at a premium."
"The Donald," as he is sometimes called, traveled to Scotland in June to try and persuade local planners and lawyers to approve the resort.
Trump told a public inquiry that his development would be "the world's greatest golf course" -- better than St. Andrews; Turnberry, Carnoustie and Troon, all in Scotland; and better than Pine Valley in New Jersey, which he called the best course in the world.
"If you reject this, there will be a terrible blow to Scotland," Trump said.
But environmentalists condemned the decision to approve the resort. James Reynolds of the Royal Society for the Protection of Birds said the resort would destroy protected dunes.
"We, and the thousands of other objectors, consider that this is too high a price to pay for the claimed economic benefits from this development," he said.
Martin Ford, who was part of the local council that rejected the resort application last year, criticized the government for backing Trump's "vanity project."
"This is a very, very bad precedent indeed and sends out a bad message about the protection in Scotland of our natural heritage sites," he said.