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Work on Edinburgh's tram line is going to be completed taking it from the airport to St Andrews square.
The decision was made at a full council meeting to debate the options available.
Other proposals would have seen the trams scrapped completely at an estimated cost of around £750 million or to complete the beleaguered scheme in full.
The other option was to finish the project as far as Haymarket in the city's west end costing £700 million.
After a five-hour discussion in front of a full public gallery councillors decided to complete the project as far as St Andrew Square at a cost of £770 million.
The original estimated cost of the line from Edinburgh Airport to Newhaven was put at £545m.
The tram works have been dogged by delays, overspend and an earlier dispute between contractors Bilfinger Berger and tram company Tie.
Deputy council leader Steve Cardownie's SNP group had called for a referendum to go before the people of the city to decide on the tram's future.
Mr Cardownie said he was "obviously disappointed'' by the decision made at the meeting of the City of Edinburgh Council.
He said: "All options had a price tag but we maintained that the Edinburgh public should determine which one they preferred.
We think it's inherently undemocratic not to give the Edinburgh people a voice in this matter.
It's their money which is going to bridge the funding gap and it should have been up to them to decide.
We are obviously disappointed but we could have predicted it."
The decision to build the line as far as St Andrew Square will be confirmed at the next meeting of the council on August 25 ahead of a deadline on August 31 set as part of the mediation process.
The report said the St Andrew Square option delivered the ``best prospect of a return on investment'' making an annual profit of £2 million.
Jenny Dawe, leader of the council, said: "I believe that a first phase to St Andrew Square is absolutely the right decision for moving forward with the project.
I look forward to the further report from the chief executive later in the summer, which I believe will strengthen the case for building to St Andrew Square and beyond - whilst giving more clarity on funding.
Hopefully we can progress this vision to ensure Edinburgh continues to be competitive in the global market and provides the modern, integrated public transport system we need.''