The Mangles Bay development at Point Peron Peninsula, about 40 kilometres south of Perth, has been given conditional approval by Federal Environment Minister Greg Hunt.

The proposal includes up to 500 boat pens, and surrounding tourism developments, such as short term accommodation, along with residential land uses.

It is opposed by environment groups and others concerned over the impact on a little penguin colony.

The project already had approval from the Environmental Protection Authority and the WA Environment Minister.

The 14 conditions include limits on clearing of vegetation, and work to ensure impacts on threatened ecological communities are avoided or mitigated.

Greens Senator Scott Ludlam said he was disappointed by the decision.

"I wouldn't say it's unexpected, we know that this government has not really done anything for the environment, in fact I think they've got an appalling environmental record," Mr Ludlam said.

"So we knew it was coming, but it's always a bit of a blow when you realise that one of those checks and balances has failed you again," he said.

Mr Ludlam said he would continue to oppose the project.

"If the political system has failed us and the environmental impact failed us again, then we turn our attention to the company itself," he said.

"We're going to try and get our hands on the business case which has never been made public.

"This is what I would consider to be the beginning of the campaign now, not the end."

The development is a joint project by LandCorp and Cedar Woods Properties.