The wind farm will power about 175,000 homes and bring around £30m annual income for the local community.
The 370MW Viking wind farm is expected to bring an estimated £566m of capital expenditure.
Scotland Energy Minister Fergus Ewing said the wind farm will bring enormous benefits to the people of Shetland, generating more than £30m annual income for the entire Shetland community and aroubd £20m of that will go directly to the Shetland Charitable Trust.
"The development will create jobs and bring income, and makes the case for an interconnector to connect Shetland for the first time to the National Grid-paving the way for more exports and further renewable energy opportunities for the Islands, including community projects and marine energy developments," Ewing said.
"The development includes an extensive habitat management plan covering around 12,800 acres, which will restore peatland and offer benefits to a whole range of species and habitats."
The wind farm will allow the construction of an interconnector allowing Shetland to export electricity to the mainland.
