Calls for government intervention in the planning process for a development on land opposite Hampton Court Palace in Surrey have been turned down.
Plans for flats and a hotel on the Jolly Boatman site in East Molesey went before Elmbridge Borough Council on Tuesday, but a decision was deferred.
The Historic Royal Palaces opposes the "huge, urban and inappropriate" plans and has called for a public inquiry.
The designs will be put before the planning committee on 26 November.
Developers Gladedale said the scheme had been "sensitively designed".
A spokeswoman previously said the site had been derelict for more than 20 years, and was voted one of Britain's worst wasted spaces in 2003.
The development would be no taller than any nearby buildings and the palace faced away from the Jolly Boatman site, she added.
The Historic Royal Palaces had written to the government to ask for the plans to be called in to be considered by the Secretary of State.
However, a spokesperson for the council said on Friday that the request had been rejected and the planning application could proceed.
John Barnes, conservation director at Historic Royal Palaces, said they were "extremely disappointed".
"Although we are as keen as anyone to end the eyesore around Hampton Court Station caused by years of neglect, and support The Royal Star and Garter Homes coming to the site, we believe the size, scale and density of the proposed scheme would be damaging to the historic setting of Hampton Court Palace."
He urged the council to reject the scheme because "a more appropriate development is still possible".