The council voted 10-3 to approve an agreement with the Katz Group under which the company will help pay for a new $450 million arena, with funding also coming from city property taxes and a ticket surcharge, the Edmonton Journal reported.
Construction is expected to begin later this year, with a targeted completion date of 2016, officials said.
It will replace 38-year-old Rexall Place, which has been the Oilers' home since their days as a founding franchise of the World Hockey Association.
An initial deal reached in late 2011 was shelved after Katz said the economics didn't work a demanded a $6 million annual subsidy. That request was later retracted and a second agreement was ultimately reached.
Several Oilers players were present during the vote, including captain Shawn Horcoff.
"We feel it's an important part of our future as players," he told the Journal. "We want to see a deal get done. We want to see a new arena. It's exciting for the fans, it's exciting for the players."