The city Planning Department rejected a challenge to the permitting process for the market Thursday.
Labor groups including the Asian Pacific American Labor Alliance filed an appeal to challenge the permits in March, alleging that Building and Safety officials failed to do an environmental review.
The alliance group claimed the local community and small businesses would be disrupted by the large retailer's presence and traffic.
Associate Zoning Administrator Maya Zaitzevsky concluded the Department of Building and Safety "did not err nor abuse its discretion" after granting the chain necessary permits to build a 33,000 square-foot store.
The appeal was one of several hurdles that Wal-Mart has cleared so far in order to open the new store.
Wal-Mart Senior Director of Community Affairs Steven Restivo said the zoning administrator's ruling is "a victory for city residents who want to bring revitalization, jobs and affordable shopping options to downtown L.A."
The new Wal-Mart will be located on the corner of Cesar E. Chavez and Grand avenues. Construction is set to begin this summer.
CNS contributed to this report.