The California Coastal Commission voted 7-4 on Friday to allow the city-approved permit for the project, ruling that it did not pose a significant issue under the California Coastal Act, said the panel's legislative liaison Sarah Christie.
The Romneys bought the 3,000-square-foot home in 2008 for $12 million.
A former neighbor, Anthony Ciani, had challenged the city permit, saying it was granted because the Romneys exaggerated the size of the lot by claiming the beach in front.
The commission ruled the Romneys do own that portion of beach.
The commission also disagreed with Ciani that the mansion will be out of character with the surrounding upscale community. The commission's staff noted that the home has been altered throughout the years.
The Romneys have submitted a plan for a 29-foot tall residence with attached four-car garage.
Romneys' attorney, Matthew Peterson, told the Los Angeles Times, the couple would probably break ground on the project in six months, and that construction would take between 14 and 16 months.
Romney sold a $5 million Deer Valley vacation house in 2009 before launching a presidential bid. His main residence has been in La Jolla and he owns a condominium in Belmont, Mass. The family has long owned a summer resort home in New Hampshire, and recently purchased two adjoining houses with horse barns in a Salt Lake City suburb.