The Environment Court has ruled against Nelson's proposed southern link road.
The court said the proposed plan for the road was the wrong place to put a state highway.
It had looked at many factors and said Transit New Zealand had not provided enough evidence to show the highway would be more
efficient than alternative options.
The decision also put a strong emphasis on how the highway would affect the community in the St Vincent St area.
It would introduce more than 20,000 vehicles a day, creating a barrier in the middle of the community which would have a significant impact on the neighbourhood's nature and social cohesion, the decision said.
The court was concerned with the negative effects the highway would have on schools in the area, in terms of noise and safety.
Nelson Green MP Mike Ward said he was delighted the southern link would not be going ahead and the decision was not unexpected.
"This is the opportunity for Nelson to show the rest of the country how to solve your transport problems in smarter ways," he said. These included an improved bus service and greater emphasis on biking and walking to work.
Victory School principal Mark Brown said he was happy with the decision, which marked the beginning of a "lot of soul-searching" about how the region was going to resolve the transport problem.
"Maybe this is one of the things that is going to ignite the Tasman District Council and Nelson City Council to get together and look at the problem," he said.
For the city council it looks like it is back to the drawing board even though it has spent almost $2 million trying to get the southern link approved.
Councillor Mike Cotton said the council would be considering whether to appeal the decision to the High Court once it had digested the reasons for it. But there would not be much point in appealing if the judge's decision was very clear cut, he said.
"It's either that or back to the drawing board and what's on the drawing board? It needs a very careful think."
- NZPA