Proposals included merging Lea and Garsdon with a new school located in the Filands development to the north of Malmesbury, or expanding the school at its current location in Lea - the route which Wiltshire Council has now chosen.
The decision safeguards the future of the 124 pupils who would have had to travel to Malmesbury for lessons, while also offering additional places to meet the increasing demand.
Kay Vousden, head teacher, said: “It’s very interesting times, we are very excited about the possibilities ahead and we’re looking forward to working with parents and the local authority on the plans.
"We are hoping there will be a new hall and facilities to go along with the new classes.
“My understanding is that the council wants us to be a one form entry school with seven classes.
“We are currently four classes, so there will be three more.
“This will be probably up to another 70 or 80 students which is a considerable expansion.”
Residents who live near the school have also expressed delight that it is to remain in the village, but have raised concerns that the development could exacerbate existing traffic and parking problems.
Emma Catley, who lives opposite the school, said: “They need to consider traffic management, parking, double yellow lines.
"That has to be a priority. It gets ridiculous now at times and with expansion comes increased levels of those things. It really is very dangerous sometimes.”
Fellow resident Sarah Coutts, agreed saying: “If they plan to expand they must have a better parking solution. It is extremely dangerous when trying to leave our drive.”
Julia Styles added: “I’m chuffed to bits but I totally agree that the traffic and parking needs to be looked at.”
In response to the concerns, Mrs Vousden said: “We are aware of those issues and we will be working closely with the local authority when developing plans. We want to find a solution too.
"We love that Lea and Garsdon is a village school and we want to look after the village.”
A Wiltshire Council spokesperson said: “We are always looking ahead to ensure we have sufficient school places and we have identified a need in the Malmesbury area due to future housing growth.
"The proposed extension will provide an additional 120 places to help meet this demand.”