The controversial flyover around Wellington's historic Basin Reserve cricket ground has been sunk.
The High Court has dismissed the New Zealand Transport Agency's appeal of a decision denying consent for the $90 million project.
The agency could appeal to a higher court, but that is expected to be unlikely.
The decision is a second victory for campaigners opposed to the State Highway 1 upgrade proposal, after a Board of Inquiry last year declined resource consent for the project.
NZTA could still appeal the decision to the Court of Appeal, but the agency today said it was too early to speculate on its next steps.
It said its remained committed to improving Wellington's transport network, and it would continue to work closely with council partners to identify a way forward to keep people and freight moving.
NZTA said it would take a closer look at the full 139-page High Court decision over the coming days.
It said at the heart of the project was a desire to improve travel throughout the Wellington transport network, and congestion at the Basin Reserve remained a real constraint to achieving this.
Save the Basin campaigners have now urged NZTA to "let it go".
Campaign spokesman Tim Jones said the agency had failed to mount a strong case and he hoped there would be no further appeals.
He said a Basin Reserve flyover would be ugly, unnecessary, outdated and inappropriate, and Wellington deserved modern, sustainable transport options.
Wellington Mayor glad the 'ugly' flyover won't happen
Wellington Mayor Celia Wade-Brown said she was glad the "ugly" flyover would not happen, but clearly some improvements were needed.
"It's a very clear decision. The flyover was an ugly solution and I consistently voted against it," she said.
However, she said the highway was an essential route and some work must be done - be it tunnelling, trenching or modification.
Wellington councillor Iona Pannett congratulated the Save the Basin campaigners on the victory.
"Once again, I call on the Transport Agency and the Wellington City Council, who have supported this project and legal action to push it through, to end its flyover fixation," she said.
"Both organisations need to stop using the courts to achieve their ends and sit down together with all the parties to agree to a new and sustainable solution for this important area.
"It is also time to stop wasting money on this project. The agency has already spent well over $11m on the application to get it to the Board. An appeal has eaten up further resources.
"This project was doomed to fail from the start. It is time to permanently bin the flyover and instead focus on restoring the Basin and facilitating 21st solutions like light rail for the city."
Labour MPs welcome decision
Labour's Wellington MPs, Grant Robertson and Annette King, welcomed the decision.
"The exhaustive Board of Inquiry process rejected the flyover because the costs simply did not match the benefits. NZTA has only itself to blame for being in this position," Mr Robertson said.
"They have failed to look properly at other options that would not have had the effect of seriously compromising the environment and heritage of our city as the flyover would have."
Ms King urged NZTA to forget about expensive court battles, and get around the table with the community and develop sustainable and practical proposals. "This should have happened long ago."
Green Party transport spokeswoman Julie Anne Genter was also pleased with the decision, and echoed that NZTA should not have taken the decision to court in the first place.
"The proposed Basin flyover was an old-fashioned, expensive engineering solution that would not have solved any of Wellington's traffic woes." she said.
"Cities around the world are investing in transport that supports people-friendly places as it is better for reducing congestion, for the economy, and for the climate."