Melbourne City Council has approved a plan by Christ Church Grammar to create a kindergarten and primary school for 171 students at a heritage mansion on Toorak Road.

The decision was made in the face of angry opposition from residents who argued parents dropping off their children would cause major traffic problems in the area, particularly on narrow Leopold Street.

But the residents dismissed the suggestion that their own heavy reliance an on-street parking was contributing to congestion, during a meeting held on Tuesday evening.

South Yarra resident Paul McSweeney said that people in the area used trams and taxis as much as they could.

"You cannot take away people's right to have a car," he said. "We do our best as good citizens not to drive but there's a limit."

Planning chair Ken Ong said South Yarra residents had an average of 2.2 parking permits per available property, while North Melbourne, Carlton and West Melbourne residents were automatically eligible to only one parking permit.

The meeting was also told that in South Yarra (north of Toorak Road) there were 2000 residential parking permits, compared to just six car share spaces.

Councillor Stephen Mayne suggested part of the solution to parking congestion could be more people signing up to car-share schemes.

The comment prompted laughs from the crowd.

Another resident, Elizabeth Fox, said that many people's second permit was used for visitors and tradespeople, rather than for permanent parking.

People in the crowd later accused Cr Ong of threatening them when he said "I think South Yarra is somewhat in a very good position [in relation to the parking permits] at the moment. Don't push us down the path — we'll do the same."

In response, someone in the audience called out "that was a threat by any measure. It won't be forgotten".

Cr Ong said "all I am saying … is council had a policy over the years to reduce the number of permits in certain areas."

Lord mayor Robert Doyle voted to approve the school's planning application but predicated that the stoush would land in Victoria's planning tribunal.

Two councillors voted against the permit for 120 Toorak Road West. "I have great concerns for the safety of kids and the elderly" said Beverley Pinder-Mortimer, who lives in the area.

Resident Pauline Hirsh​ told the meeting Leopold Street had recently featured in Channel 7 reality police show "The Force", when a woman sideswiped​ six cars.

The school plan was originally opposed by council's engineering services department, who found there was not adequate parking planned to cater for dropping off and picking up students.

A report submitted by the school's traffic engineers had suggested a number of measures — such as a staggered starting time for different groups of students — to deal with the parking issues.

But the council officers concluded there was "little reassurance that any measures will be implemented".

Engineering services eventually withdrew their objection after VicRoads approved a plan to provide five additional parking spaces on the south side of Toorak Road. Another 28 parking spaces will be built as part of an underground car park in front of the mansion.

Council officers said the development would provide a net benefit to the community, in a municipality that has been crying out for more schools.

The council received more than 100 objections to the project, which will see the demolition of a "non-original" rear part of the Victorian "Italianate-style" building.