Nabucco West, a shortened version of the original $10 billion project, would cross 238 miles of Hungarian territory. The pipeline was one of the projects selected by a BP-led consortium working in Azerbaijan for possible gas deliveries to European consumers.
Reinhard Mitschek, managing director of Nabucco Gas Pipeline International GmbH, said the last environmental permit for the pipeline was granted by the Hungarian government.
"The granting of this permit is a substantial step forward in Hungary and signifies the advanced stage of development of Nabucco West," he said in a statement.
Hungarian representatives explained the next step would be to secure permits for construction. The entire pipeline would transport gas from near the Turkish border with Bulgaria to a central European gas hub in Austria.
By next year, the BP-led group should decide between Nabucco West and the rival Trans-Adriatic Pipeline as the conduit for Azeri natural gas.
Both projects are part of the Southern Corridor, a transit network meant to break the Russian grip on the European energy sector.