The proposal was discussed at a special meeting of the Cabinet held on Wednesday.
The Cabinet passed a resolution put forward by Cllr Patrick Kitterick, Cabinet member for regeneration. It resolved that Pennbury is a suitable site for further consideration as an Eco Town, and that the council would support it - subject to a number of conditions being met.
The conditions include making affordable housing at least 30% of the scheme; that the development should face the city and grow as a sister town to it; and that plans for jobs need to be co-ordinated with the work going on in the city.
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The Cabinet wants a tram system to be put in place, and to be involved in the development of cutting edge technologies in house building and community development with the Co-op.
And it wants to talk to the government and other local councils affected about setting up joint governance of planning arrangements, to ensure that all of its conditions are met.
Cllr Kitterick said: "After considering all of the information we have had so far, we believe that the Pennbury site has potential as an Eco Town.
"Our colleagues in other authorities may well share our views on some of the issues we've identified, but we understand that they will also have other issues which need to be taken into account when judging the merits of the proposal.
"There are still many more discussions we need to have, but we think that the council will be able to back this proposal if the final scheme is one which meets all of our requirements, and stands to benefit the city and the people of Leicester."
(CD/JM)
