Campaigners have lost the fight to stop their historic Warwickshire village from almost doubling in size and a major relief road being built across acres of green fields.
Nearly 700 homes are to be constructed in Shottery with a bypass through the village to reduce traffic congestion in nearby Stratford-on-Avon.
The plans are outlined in an inspector's report published, following a public inquiry into Stratford's planning blueprint.
The report will become part of the local plan, which sets out the district council's policies and proposals for the development and use of land in Stratford-on-Avon district until 2011.
Planners said last night it was a case of when, not if, the houses would be built in Shottery which is home to the cottage of Shakespeare's wife Anne Hathaway.
The district council said it was now waiting for outline planning applications for the development. But campaigners, who formed Residents Against Shottery Expansion (RASE) group to fight the proposals denied it was a fait accompli and said they would launch a challenge against the inspector's decision.
It is understood developers have offered to pay for the relief road in exchange for creating 660 homes on
green-field sites, under a Section 106 agreement.
The bypass, to be known as the Stratford- upon- Avon Western Relief Road, would link the B439 Evesham Road and the A46(T) Alcester Road running along the back of Anne Hathaway's Cottage.
The inspector said the road would reduce congestion in the town centre and would also remove tourist traffic visiting the cottage from the narrow roads of Shottery.
Despite the apparent defeat, Martyn Luscombe, chairman of RASE, said: "The report is disappointing, but in no way disconcerting, it's merely a step along the way."