The Environment Court has rejected a Malaysian firm's plans to build a $30 million sawmill near Whangapoua, Coromandel.
The decision has "astounded" Blue Mountain Lumber's management but delighted local opponents.
The sawmill's development was previously thought to have been assured.
A hearings panel, which included an independent commissioner, gave the project the green light last year -- but that has now been overturned.
Paul Bibby, of the Whangapoua Environmental Protection Society, said the community had fought against the sawmill proposals for three years. "We're more than delighted," he said.
The issue had divided the community - 90 per cent are against the proposal, but 10 per cent are in favour because of job prospects.
The sawmill would have been set deep in pine forest at Te Rarenga, but its 30m smokestack would have been visible from the popular tourist spot Castle Rock.
Mr Bibby said the application had been declined on the basis of the discharges to land and streams.
Blue Mountain Lumber spokesman Garth Moore said: "I'm astounded. The project put up was well suited. It was pristine."
No further appeal could be made, unless there was something that was wrong as a point of law.
He confirmed the process up to this point had cost the company "the thick end of $1 million".