The application for the change of use for the listed building at 6A Northland Road, which is currently used as rental accommodation, was made by Shane Birney Architects on behalf of Ursula Walsh.
Chairman of Council's Planning Committee, Councillor Christopher Jackson, welcomed the approval.
He said: "The fire station building is one of significant architectural and historic importance and is situated in a prominent position above the level of Northland Road.
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"The site is listed within the Central Area of the Derry Area Plan and is beside the existing Northland Road Fire Station and Radio Foyle and within walking distance of our commercial core.
"The Bed and Breakfast will offer visitors a central location to explore our City and District and will be an important and much needed addition to Derry's tourist accommodation options."
Head of Planning at Derry City and Strabane District Council, Maura Fox, added: "This application is a good example of the reuse of a listed building where the character and appearance is protected. It is ideally located for visitor accommodation and is situated a short walk from the city's quayside, commercial centre and the city's visitor attractions. This development can support existing services and facilities in the Central Area of the city such as retail, catering, entertainment, leisure and transport."
