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With approval from the Planning Commission, the neighborhood group is taking over the former Snowbright Laundrette.
A manager said he expects the store to stay open until early next year.
The Planning Commission approved the yoga studio's request for a formula retail permit.
This will be the company's second office in the neighborhood.
The city says car sales and office operations aren't permitted in the neighborhood.
Pending permitting and construction, the new gym will open early next year.
The move has been endorsed by local merchants associations.
Plans for a mixed-use development would include on-site affordable housing and preserve many of the historical features of the site.
The 78-unit building will rise next to the Bob Ross LGBT Senior Center.
The buyer would own the new 28-unit, 5-story building planned for the space.
"In general, the project is disrespectful," said a neighbor who opposes the owners' move to reclaim the space.
The Duboce Triangle washateria has tried unsuccessfully to reinvent itself multiple times in recent years.
The site was the home of a family-owned gas station for decades.
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