The city's planning and land-use committee has a thumbs-up to the 15-storey residential proposal, triggering a public hearing before a final council vote.
The development incorporates three lots and a publicly-owned mid-block walkway.
Millie's Lane, according to developer Concert Properties, would be doubled in width to "be transformed into a vibrant and active place through … new surface treatment, landscaping and public seating."
Concert also plans to restore and incorporate the heritage English sweet shop's facade.
The residential tower would feature ground floor commercial, as well as 157 lower-priced and compact residential units.
It will also include 110 underground parking stalls (fewer than required) and storage for 163 bicycles.
Last year, city council rezoned the property for an office building, but Concert changed its focus to residential after changes in the real estate market.
rholmen@vicnews.com