Victorian Planning Minister Richard Wynne has reached an agreement with developer Cbus to approve a scaled down version of a mixed-use development that was rejected last month due to concerns about overshadowing of the Yarra River.

Wynee knocked back the proposal in March for a 164-metre, 47-storey twin tower of a similar shape.

The tower, dubbed the 'Pantscraper' because of its unusual shape, has been scaled down 21.6 metres, or six stories. Overshadowing will only go as far as the northern bank of the river in mid-winter.

The current version is actually the third proposal for the site. The original plan was for a 100-storey, 295-metre single tower on the site.

The current proposal includes more than 300 apartments, and approval comes despite indications that the Melbourne apartment market could be oversupplied. One tower will contain residential apartments, and the other will include offices. The development will also include a hotel, shops, and 2,000sqm of public space. The top floor will be a 'skybridge.'

Cbus is the construction industry superannuation fund, and is chaired by former Labor Premier Steve Bracks.

The developer will now submit amended plans for final approval. It is hoped that construction will begin before the end of the year.