A year-long fight to save a drama and arts block on the former St Mary's School site in Wantage ended on Monday when Vale of White Horse councillors gave Berkeley Homes permission for a housing development.
But campaigners say they will start looking for other sites for an arts centre for the town in the next few weeks.
The developer has agreed to build a footpath costing more than £30,000, which will link Chain Hill and Wantage Primary School, providing a safe route away from busy roads for pupils.
Berkeley Homes will demolish the old school buildings, classrooms and the arts centre block on eight-acre Newbury Street site and build 230 houses and flats, including 92 affordable homes. The listed chapel will stay, along with St Gabriel's House. Work is due to start next month.
Chairman of the Wantage Arts Centre campaign group, Bob McLatchie, said the group had hoped to buy the purpose-built block, set up a charity and run it as a community arts centre.
He said: "I'm disappointed but I was surprised with support for the idea of retaining the arts centre which came from all sides of the planning committee.
"We know there's a lot of support in Wantage for a centre and we will be having a meeting with our members in March to look for other opportunities for a centre in the town."
Planning officers said the nature and amount of public use would not justify keeping the building, nor would a contribution from the developer.
Terry Quinlan, chairman of the committee, said: "We understand the strength of feeling about this but there are practical reasons why the block could not be saved."
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