Applicant Fiona Cameron, of Edinburgh-based Let's Go Homes Limited, has won planning approval from Scottish Borders Council for the change of use of the former flat above the Harrow Inn at 1 Sime Place into a guest house comprising of five en-suite bedrooms.
It is not known what implications the planning bid will have on the long-term operation of the lower floor bar, located a short distance from the Great Tapestry of Scotland, which is currently closed.
A report from the council's heritage and design officer says: "It is important that any proposals for the upper floors does not limit the viability of the ground floor, which would appropriately remain in pub use and provide an active frontage to the street in this town centre location".
A report from Carlos Clarke, the council's lead planning officer, adds: "The property is within the town centre, and outside the core retail area. The provision of a guest house within such a centrally located building is an appropriate town centre use.
"It is not clear how the use will operate given the extent of the accommodation proposed is fundamentally limited to bedrooms, but that is a matter for the owner/operator.
"The main public house features exist to the ground floor only, but there some historic features on the upper floor."
The Harrow Inn is a category C-listed public house that was built in the 19th century and is regarded as being of "special architectural and historical interest".
A report from the Architectural Heritage Society of Scotland says: "This C-listed 1868 public house is built from coursed sandstone ashlar which appears in good condition.
"Unfortunately it has since been painted, for at least 40 years, and this is trapping moisture in the sandstone which then causes the paint to peel and eventually damage the structure of the sandstone."