SHANGHAI—China's planning agency has approved plans for a Disney theme park in Shanghai, the Walt Disney Co. said Wednesday, a major step toward setting a deal for the long awaited project.

The approval by the National Development and Reform Commission will allow Shanghai, China's biggest city, and Disney to work on final details for the amusement park, to be located in the city's eastern Pudong district.

"China is one of the most dynamic, exciting and important countries in the world, and this approval marks a very significant milestone for The Walt Disney Company in mainland China," Robert A. Iger, president and CEO of The Walt Disney Company, said in a statement.

It said the initial phase of the project would include a "Magic Kingdom-style theme park with characteristics tailored to the Shanghai region." Amenities will be consistent with other Disney resorts in the world, it said.

Shanghai's city government issued a brief statement announcing the approval.

Disney has gradually expanded its presence in mainland China after opening a theme park in Hong Kong in 2005 and now has offices in Shanghai, Beijing and Guangzhou.

The park will be a major showcase for Shanghai, the mainland's main financial and commercial center. The city is in the midst of a construction boom ahead of the World Expo, which will open May 1.

Last weekend, Shanghai's mayor, Han Zheng, told reporters the central government had issued the required approval and that the city would be making an announcement soon. However, city officials contacted early Wednesday did not have any immediate comment.

The timing of the breakthrough is handy as it comes less than two weeks before President Barack Obama's planned Nov. 15-16 visit to Shanghai.

Last spring, Mayor Han said on the sidelines of the national legislative session that the two sides were getting down to serious negotiations.

But he compared Disney and Shanghai to "lovers, still in love but having a hard time deciding when to get married," the Shanghai newspaper Oriental Morning Post quoted him as saying.

Shanghai's leaders are keen to develop this former bastion of Chinese industry into a global services and financial center, and building a Disney park would create jobs and be a key draw for tourism.

Residents were long ago moved off farmland in Chuansha, a part of Pudong district near the city's main international airport, to make way for the theme park.

Speculation over progress on the Disney park has become a frequent theme for stock market players. Han's comments over the weekend prompted rallies in shares in local property companies and others likely to benefit from its construction.

Disney's theme park in Hong Kong has won disappointing attendance, raising questions over the prospects for success of the Shanghai park.

But the plan is popular among local residents, especially those who might end up profiting from its construction.

"Oh that's great!" said a local resident of Chuansha town when told of the project's approval. He would give only his surname, Cai, out of fears that his comments might affect negotiations with local officials over compensation for his resettlement.

"The Disney park would make this area into a whole new world," Cai said.