A two-year battle on the Upper East Side pitting well-heeled neighbors against a high-end developer and his star architect ended yesterday when the Landmarks Preservation Commission approved a scaled-down addition to an historic building.

The commission voted, 7-1, to approve the construction of a three-story addition, plus a roof-top penthouse, that will go above the Parke-Bernet auction house at 980 Madison Ave., in the heart of the Upper East Side historic district.

Bill Kahn, of New Yorkers for Responsible Development, said opponents are weighing an appeal to the City Planning Commission and the City Council.