Residents cheered as planning chiefs threw out an application to develop a Winklebury pub.
Campaigners battled for more than six months against plans submitted to the borough council to convert the derelict Three Barrels into two shops.
Planning officer Patricia Logie had recommended the plans approval but councillors on the development control committee voted unanimously to block the proposal.
Developer Duncan Challis has vowed to appeal the decision.
After the meeting, he told the Observer: “The fact remains that the planning officers recommended this application for approval.
“So we are reasonably confident that our appeal to the Secretary of State will yet allow us to regenerate this building.”
But the move would face stiff opposition from residents and shopkeepers.
Since plans were submitted in December 20, two petitions with 543 signatures and 24 letters of objection were sent in.
They stated that the shop fronts would destroy a community. The shops and flats in Winklebury Centre are built around a central square facing each other, facing away from Winklebury Way and the car park.
But the proposed development backs the shops onto the square and the front entrances face west, towards the road.
Campaigner Lea Jeff said: “The plans are not in keeping with the square - the whole thing is ridiculous.
“It's the whole insensitivity of it and our petitions show a community do not want it.
“If they just turned the shops around then there would be less of an outcry.”
The committee said the reasons behind the refusal were because the plans were not in keeping with the area, and the community were against the development.
But Mr Challis accused the committee of being biased against him.
He said: “We are clearly disappointed at the decision of the planning committee, but unsurprised.
“With elections due in less than three months, there was never going to be an appetite to vote in favour, given the highly vocal campaign of opposition orchestrated by established local retailers.”
The committee's chairwoman, Cllr Anne Court, dismissed the claims. She said: “As chairwoman, I would emphasise that the committee considers all planning applications on the planning merits of the case only. That was certainly the case in this application.
“The members of the Development Control Committee decided to refuse planning permission as, in their view, the proposed development was of poor design that did not respond to local distinctiveness.”
