Councillors scrapped the proposals after a four-hour City of York Council planning meeting in which doubts were raised over the detail of the plans.

Developers Grantside had put forward plans to build businesses, hotels, a health centre and new homes on the Bishopthorpe Road site, which would have created 2,000 jobs.

The £185m project had the backing of council officers and the regional development agency Yorkshire Forward.

Chair of the planning committee, Councillor Richard Watson, said: "The main concern was that of over-development on the site. Members were very concerned as to the amount of traffic in the area that would have come about as a result of the development.

"We were also worried about the impact on the listed buildings and surrounding conservation area."

Councillors were also worried existing housing on the north and east of the site could become isolated after the development.

Councillor Watson added: "I would hope that Grantside would take on board the comments that the council has made. We would most certainly be open to an amended scheme."

The factory was closed in September 2005 after 200 years of chocolate making in the city.