Killybegs is hoping to become the "Kinsale of the north-west", following planning approval for a 100-berth marina in the harbour.
Donegal County Council has sanctioned the privately funded €3 million project for the old fishery harbour, subject to 15 conditions.
The backers say they are confident that the Department of Communications, Marine and Natural Resources will award a foreshore licence for the project. If the licence is approved, the marina could be open this summer, they say.
The plan for the marina, immediately north-west of the Blackrock pier in the town, was drawn up almost three years ago by three local businessmen, Barry Sharkey, managing director of Barry Electronics, Paul O'Neill of O'Neill Fishing Co Ltd and Charles Vial, managing director of C Fish Ltd.
The group said that the project would give a vital boost to tourism, following completion of the €55 million deepwater harbour at the port.
Their plans included construction of an administration centre and a maritime cultural centre. However, the plan was opposed by Killybegs Parish Council which said any such marina should be built with State funds.
A Deloitte & Touche report commissioned by Donegal County Council had recommended that five marinas be built in the county at Burtonport (100 berths), Killybegs (100 berths), Bunnagee (15 berths), Ballywhoriskey, Fanad (three berths) and Tory Island (15 berths).
Mr Sharkey welcomed the decision.
"There are no marinas for visiting yachts from Kilrush to Lough Swilly, and this is an ideal location for marine leisure, from sailing to sea angling to scuba diving. We will also be catering for small fishing vessels."
He added: "It is good news for Killybegs at a time when it needs some good news."