The 800-kilometre Rock Island Clean Line was subjected to a two-year review by the commission due to opposition from power generators in Illinois.
Chicago-based Exelon Corp, which operates nuclear plants in the state, had said competition from Iowan wind projects would result in lower power prices fall and thus hit Exelon's profitability. But this concern was dismissed by the commission.
The last remaining barrier to the construction of the project remains the purchase of land for the line.
Some landowners have already signed leases with developer Clean Line Energy, others have opposed its construction. This means the company may require state approval for compulsory purchases.
Illinois already holds more than 4GW of wind capacity. However, Iowa's greater total capacity, at almost 6GW, and its sparse population, means it has a surplus of power it is keen to export.
Clean Line Energy is a developer of renewable-energy high-voltage direct-current (HVDC) transmission systems. It is currently working on four lines carrying wind power from the central US to high-population areas.
In March, the company announced an agreement with Southwire Company for the supply of the overhead transmission cable for the project.
Siemens has also been selected to work on the transmission system. It will develop on the two HVDC convertor stations.