Residents told Doncaster Council's planning committee that people were becoming ill over the number of flies that have been attracted to the Morris Metals site near Bankwood Lane, Rossington, and urged councillors to turn the plans down.
But the committee approved plans to extend the site so the firm could build a material recycling area, put up perimeter fencing with netting, and put up a building to keep its steel can operation inside. They were told that the firm would still be able to continue their recycling work regardless of their decision under existing planning applications.
After the meeting Rossington ward Coun Rachel Blake said residents were angry with the decision and would set up an action group to try to address the problem.
Committee chairman Iris Beech had the casting vote after the committee had voted three for and three against.
Council planning officer Dave Richards told the committee that in May the site had been issued with an enforcement notice from the Environment Agency because of the number of flies at the site. It had raised concerns over the height of stockpiled metal, and the arrival of metal containing flies.
The firm blamed a machinery break-down he said.
A re-inspection on June 8 stated that the firm had sorted the problems, but Mr Richards said the EA would continue to monitor the site. Councillors heard the new scheme would mean some of the operations were performed inside, potentially relieving some problems.
But Coun Blake told the meeting the fly problem was not solved.
She said on Friday she visited a house 200m from the Morris Metals site, and the householder had put up fly strips to catch insects. She said she stopped counted after she reached 100 flies on the strip.
She said: "Residents are becoming seriously ill due to this operation - it has to stop, They can't be allowed to expand, and DMBC should consider going down the statutory nuisance route."
She told the meeting she blamed the company starting to recycle cans for the problem and said in the recent 30 degree heat people had been having to whether to open their windows for fresh air, knowing it would result in hundreds of flies in their house, on their food, and on their bodies when they slept.
Planning conditions limit the site to 75,000 tonnes of metal per year.