The Parole Board said yesterday it welcomed Justice Young's decision.
A board spokeswoman said the judge's direction for a reintegration plan to be developed was for Corrections and Wilson to resolve, and any plan would then be submitted to the board.
"A panel of the board is scheduled to convene to consider the proposal,'' she said.
Under his strict release conditions, Wilson will have to live at a house near Whanganui Prison, be monitored by satellite tracking and will be under constant supervision whenever he leaves the property.
Wanganui District Council said it would continue to fight the decision to move Wilson into its community.
It will hold a meeting tonight, open to the public, to discuss its next moves.
Wanganui Mayor Annette Main said yesterday she was "frustrated and disappointed'' with the outcome of the hearing.
"We have legitimately put the concerns of our community at the heart of our decision to pursue legal action and whilst that has not produced our desired outcome, we will continue to listen and support the Wanganui community in an overriding and powerful desire for a safe community.
"I have said this many times and I reiterate - Stewart Murray Wilson will never be welcome in our community or any other community in New Zealand,'' Ms Main said.
She said Wanganui held Corrections and the police responsible for ensuring Wilson caused no harm to the community.
"This is a significant responsibility and one which they cannot hide from,'' she said.
Councillor Ray Stevens said yesterday he was gutted by the decision. "I was hoping the justice system would work, but it has failed Wanganui.''
He would continue with his campaign to have Wilson trespassed from as many Wanganui shops as possible and hoped his council colleagues would join him.
Fellow councillor Michael Laws said Wanganui's fight wasn't over.
"When the authorities won't or can't protect a community against a sexual pervert like Wilson, then a community takes measures to protect itself.''
Wilson is expected to be released tomorrow after serving 18 years of a 21-year sentence for crimes against women and children.