The Secretary of State has refused to grant planning permission to build up to 650 new homes at Leckhampton in south Cheltenham, Gloucestershire.
The announcement follows a local inquiry that took place between September 22 to 25 and September 29 to October 2 of last year.
The refusal was accompanied by a comprehensive report that reviewed the primary issues taken into account by the Inspector and considered by the Secretary of State.
The two companies spent years compiling a scheme intended to provide Leckhampton and the surrounding area with badly-needed housing.
Hundreds of local residents, however, objected to the proposals, citing concerns that the new houses could elevate local flood risk, fill existing schools to breaking point, and cause gridlocks on the roads.
The land slated for development is part of a bigger site that forms the focal point of an ambitious housing plan compiled by the councils in Cheltenham, Gloucester, and Tewkesbury.