The agency gave the go-ahead for the clearing of 588 acres of forest to make way for the $17 billion hydroelectric dam, which would be the world’s third largest.
The planned 11,000-megawatt project has been met with widespread criticism from native Indians and conservationists since it was first proposed some 30 years ago.
Environmentalists claim that the Belo Monte dam would threaten the survival of indigenous peoples and could leave as many as 50,000 people homeless, as 190 square miles would be flooded. It would also partially dry up a 60-mile stretch of the Xingu River.
Norte Energia, the utility led by the state-owned Companhia Hidro Eletrica do Sao Francisco, won the bid for the project last year.
The plant would start producing electricity in 2015.
The Brazilian government says the dam is necessary to sustain the nation’s fast-growing economy.