Campaigner Gen Toop said the dam would have meant more industrial dairying and more pollution so it was a win for the country's rivers.
"If the court had allowed the Government to carry out its destructive plans for the Ruataniwha dam, it would have set a dangerous precedent for New Zealand's conservation estate had Forest & Bird not stepped up to challenge the Government's plans."
Regional councillor Tom Belford welcomed the decision and said the Supreme Court had driven a stake through the heart of the project, and was a reminder of how "shoddy" the decision-making process had been.
Fellow councillor Debbie Hewitt who had supported the project said it was helpful to have clarity, and said it was not the death knell for the project.
"I would not say it's doomed - I look forward to seeing what DoC is going to do and moving forward with whatever guidance DoC gives us."
Irrigation New Zealand chief executive Andrew Curtis said it was a sad day for Hawke's Bay and New Zealand, and that the dam depended on the land swap.
"If the dam does not go ahead it will have a significant impact - particularly on Central Hawke's Bay farmers and the rural businesses that support them, and on the Tukituki River."
Central Hawke's Bay group Water Benefits All spokesman Jerry Greer said they were disappointed with the ruling but the RWSS had had its ups and downs over the years, and yesterday's development was just another hurdle.
The group took heart from Prime Minister Bill English's statement yesterday that the Government would now look at changing the legislation on such land swaps.
Welcoming yesterday's news, CHB Forest & Bird co-chairman Grenville Christie said: "The appeal was never over just 22ha in the dam flood footprint but about the terrible precedent HBRIC was trying to establish."