A planning inspector has said land on the edge of Kendal should not be used for a new industrial estate.
South Lakeland council officials had wanted land near Burton Road, Oxenholme, to be given over to business and industry for a number of local firms which want to expand.
But people living near the site argued that existing sites in the town should be used instead when a public inquiry into the plans opened in June.
Inspector Shelagh Bussey, published her report on Thursday.
She agreed with objectors that there was adequate land and buildings for business elsewhere in the town.
Ms Bussey also said the site was too important in landscape terms to be developed.
South Lakeland council is not bound by the recommendations, but it would be unusual for councillors to ignore them.