Shopkeepers and ward councillors are furious after the planning inspectorate ruled in favour of the grocery chain's appeal to create 20 jobs by converting Parsons Garage in Oxford Road, west Reading, into a Tesco Express.
But Barbar Siddique Butt, who owns Butt's Convenience Store just yards from the site, condemned Monday's result and said: "They might as well change the name Reading to Tesco Town. I don't know how they can let them do it."
Tesco appealed at a three-day public inquiry in June against Reading Borough Council's decision last October to reject the plan, for the second time in a year, because it amounted to "intensification" of an area containing Oxford Road Community School, two bus stops and pedestrian crossings.
Neighbourhood businesses complained that with three other Tesco stores - in Portman Road, Tilehurst Road and the eastern end of Oxford Road - already open within a mile radius it would damage their trade.
But planning inspector Mike Robins ruled it a "highly sustainable location" and said vehicles using the store's car park will not "materially impact on the free-flow of traffic".
The inspector ordered a parking ban in the delivery area and said the car park must only be used by customers.
Mr Butt, who submitted a 400 signature petition against the company's first application, said: "We are already struggling because of the recession. Just imagine our situation when they open. But we can't run away from our shop, we have to be positive and compete with them."
Peter Sirrell from secondhand store Music Man fears extra traffic will endanger schoolchildren and said: "If motorists are darting in and out of Tesco and not looking out for the children there will be an accident sooner or later."
Planning committee member and Battle councillor Chris Maskell branded it a "poor decision" and said: "They haven't taken into account the views of local people and failed to understand the local situation."
But Tesco spokesman Simon Petar said: "As well as providing jobs for local people we will also provide additional choice and range for local customers."