A reduced proposal for new housing on part of the Blenheim Palace Estate is being worked on by developers following criticism.
Pye Homes wants to build 1,200 homes on land in Woodstock owned by the palace, but has put forward an alternative scaled back application of 280.
The developer said the historic town was in need of new housing.
However, Peter Jay at Woodstock Town Council said building in the area would be strongly resisted by local people.
Both Cherwell District Council and West Oxfordshire District Council turned down previous proposals on land north of the Bladon roundabout, but the developer could still appeal.
The smaller option includes employment space and affordable housing which, developers say, will "complement the historic character of Woodstock".
Deputy town mayor Colin Carritt said he welcomed the revised plans because the town centre was in decline.
He added: "A modest development in that part of Woodstock is long overdue.
"The Blenheim Estate is a local developer, as opposed to a national house builder, so they're a safe pair of hands with the interests of the town at heart."
However, Mr Jay warned that the affordable housing could still be "miles beyond the reach of the people most in need of it".
"Building on areas which are very beautiful and regarded as part of what makes the community's environment attractive is controversial," he said.
Daniel Hayman, on behalf of the Blenheim Estate and Pye Homes, said: "The site is identified in the West Oxfordshire strategic housing land availability assessment and as such is regarded as potentially suitable."
Previously the International Council on Monuments and Sites said the development would harm the Unesco World Heritage Site.
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