Environment Minister Greg Hunt approved the 37,380 hectare Kevin's Corner project on Friday.
The mine, to be operated by a joint India-Australia consortium, GVK-Hancock, is the first to be approved since the introduction of a new water trigger rule by the previous federal government.
Greenpeace claims Kevin's Corner will use more than nine billion litres of water a year and the Lock the Gate Alliance says more information on its impact on Galilee Basin groundwater is needed.
On Monday, 13 water science experts urged Mr Hunt to reject any mining proposals that would adversely impact water supplies.
They said mining and coal seam gas extraction could damage aquifers, rivers and water catchments.
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Queensland Resources Council acting chief executive Greg Lane said Kevin's Corner stood to not only improve living standards for millions of people in India, but also open up one of the world's most exciting new coal provinces.
"GVK is to be congratulated for its commitment to this project in the toughest operating environment that the Queensland coal industry has faced this century," he said in a statement.
The news came as BHP Billiton announced it was scrapping plans for a new coal export terminal at Abbot Point in Queensland, the Guardian reported.
