The community board has now voted to support the plan despite fierce and at times rowdy opposition.
Protesters jeered at at speakers and yelled comments such as "You're building over a Christian cemetery!" while holding signs that read, "Show respect for 3000," referring to those who died in the September 11 terror attacks.
Many said they were not opposed to a mosque but did not want one next to where the World Trade Centre had stood.
The city is still recovering from the devastating impact of the attacks in 2001 when hijacked airliners were crashed into the towers, which subsequently collapsed. An identical attack was mounted on the Pentagon, which suffered far less damage. Another airline which was expected to hit the White House, crashed in Pensylvannia after passengers fought the hijackers.
The families of New York's September 11 victims "would be wounded by erecting a mega mosque so close to the place where their loved ones were massacred," said Viviana Hernandez, a chaplain. "Even though they may have altruistic reasons, the real terrorists will see it as a win on their side."
Conservative activist Mark Williams has called the proposed centre a monument to the terror attacks.
The organisations sponsoring the project said they are trying to establish a vibrant and inclusive-world class facility.
Plans for the Cordoba House include a performing arts centre, swimming pool, culinary school, child care facilities and worship space.
It would provide 150 full-time jobs, 500 part-time jobs and an investment of more than $100m in infrastructure in the city's financial district, according to Daisy Khan, spokeswoman for the Cordoba House.
Her husband, Imam Feisal Abdul Rauf, executive director of the Cordoba Initiative, one of the project's sponsors, said he understood the pain that people have about 9/11 but he said his community and congregation were among those that died in the attacks.
Manhattan Borough President Scott Stringer said that by supporting the multi-faith community and cultural centre, the board "sent a clear message that our city is one that promotes diversity and tolerance."