A public inquiry is set to be held into plans to build 79 houses on land opposite Abbotsford House near Melrose.
The plans for opposite Abbotsford will go to public inquiry
The Scottish Executive has "called in" the project which was approved on a casting vote by the development control committee of Scottish Borders Council.
The move was welcomed by countryside campaigners opposed to the plan near the former home of Sir Walter Scott.
A spokesman for the council said the decision could have a big impact on other developments in the area.
Nicholas Watson of the Save Scott's Countryside group welcomed the decision.
"It is not just about the houses at Netherbarns," he said.
"We are really pleased with the reasons that ministers gave for calling in this application.
"They called them in because objections to the development of the site have not yet been considered through the local plan process."
Mr Watson said the council should have waited until the public inquiry into the local plan later this year.
"We think it is disgraceful that the council should ever have brought forward such a contentious site before those objections could be heard at public inquiry," he said.
"This has a big knock-on effect because the council is very eager to bring on other developments which are equally contested.
"They will have to think again."
Alistair Lorimer, SBC development manager, agreed that the "calling in" of the Netherbarns proposals could have a wide impact.
"Netherbarns and other sites that are being challenged are in the finalised local plan as potential allocated sites," he said.
"We had introduced and had council approval for our interim housing policy.
Developers M & J Ballantyne want to build the houses at Netherbarns
"We felt that with those two pieces of policy background we were in a defensible and robust position to take forward applications.
"That has clearly been put in some question by the recent letter from Scottish ministers," he added.
Mr Lorimer pointed out that the council had a legal obligation to have a five-year supply of land for housing development.
He said the "calling in" decision could make that impossible to achieve in the central Borders.
A spokeswoman for the Scottish Executive confirmed that the plans had been called in and would go to public inquiry.
She added that the case was with their reporters' unit and it would be several months before the inquiry process got under way.