The agency, Ibama, said the Belo Monte dam on the Xingu River had been subjected to "robust analysis" of its impact on the environment.

The government says the dam is key to meeting Brazil's growing energy needs.

But opponents argue it will harm the world's largest tropical rainforest and displace tens of thousands of people.

In January, Ibama gave the go-ahead for initial work to begin on the site on the Xingu, a tributary of the Amazon River.

Now, Ibama has issued the penultimate licence that the Norte Energia consortium building the dam needs.

This means, in theory at least, that building work on the dam can begin.