Opponents of plans for 99 apartments on the site of a former ice rink are celebrating after a government minister upheld their objections.
Communities and Local Government Secretary Ruth Kelly overturned the decision by the Liberal-Democrat controlled Durham City Council to approve the flats and a heritage centre on the north bank of the River Wear.
Following a public inquiry into the scheme, in which local Labour MP Roberta Blackman-Woods as well as The City of Durham Trust and English Heritage voiced their objections, Ms Kelly concluded that the development would "harm the character and appearance of the Durham City Conservation Area" including the castle and cathedral.
Welcoming the decision, Ms Blackman-Woods said: "This is a victory for our campaign to stop this badly designed and inappropriate development. I have had countless comments from local residents that they were appalled that this block of flats got the go-ahead.
"If the city council planners had got their way this building would have been extremely detrimental to the setting our World Heritage Site and the city centre in general.
"The Planning Inspectorate agreed with me that the proposed development was against local development policies, national planning policy guidance and suffered from problems with design.
"We had several important reasons to object to this development and we feel vindicated for our opposition."
Durham City Council leader Fraser Reynolds had previously defended the granting of the application by saying: "It would indeed, be nice to have a new ice rink, a new cinema or a museum but this was not a viable option," added: "One thing people tend to forget is that part of the riverside was an industrial wasteland not too long ago.
"It has also cost us £30,000 for the public inquiry and, unfortunately, this decision leaves us with a defunct building which cannot be demolished in a prime location which will be almost impossible to develop."