The proposals sparked protests from businesses and residents over a contentious 100-metre stretch of main road in Roseburn.
But after weeks of talks and a number of compromises, the council announced it been approved with all-party support.
Traders had voiced fears that “Option A” – taking the cycle path along Roseburn Terrace – would have a devastating impact on businesses there. They preferred “Option B” which diverted cyclists along Roseburn Place and Roseburn Street, but cycling campaigners argued it was not a direct route and would not be used.
Transport convener Lesley Hinds said the final decision was an “enhanced Option A”.
There will now be 24-hour loading on Roseburn Terrace, extra parking, wider pavements on both sides of Roseburn Terrace, a new pedestrian crossing outside the Roseburn bar, and a “rat run” along Roseburn Place and Roseburn Gardens will be closed off.
• READ MORE: 6,000 sign petition against Roseburn cycle path
Councillor Hinds said: “I’m pleased we’ve now arrived at a final design for this bold and transformational project, which will make it so much easier to cycle and walk into and right through the city centre by linking up with our already well-used Quiet Routes across the north and west of Edinburgh.
“I recognise the concerns of local residents and businesses and I hope we can work with them in the coming months to ensure the project works for them too.”
Cycling campaigner and local resident Henry Whaley said he was happy a compromise had been reached which had cross-party support.
“We realise some of the traders are concerned about the impact, but we think it will be a good thing. We have always said there are examples where cycle lanes have improved the feel of a street and more people go and shop there.”
He said he hoped work on construction of the new cycle route would start in 2018.
“After 12 months of implementation there will be a full review to see if it is doing what people think it will do.
“That will give it time to bed in and we can see whether it has got people out of their cars and walking or cycling instead.
“We think people will see this is a safe route into the centre of Edinburgh from the west and opt for a healthier and less polluting option.”
But Roseburn resident Pete Gregson, who led the campaign against the cycleway, said the decision was a disappointment.
He said: “The whole thing is flawed. They have not done a proper business case. If businesses don’t fail and there is no congestion that will be great but we fear a disaster.”
However, Mr Gregson said some gains had been made. “It shows opposition is worthwhile because we managed to get some parking back and some changes.”
And he said the promise of a review meant the campaign would continue. “The trouble is they have not set the terms of the review – how many cyclists must use it or how many businesses must lose income for it to be a success or a failure?”