Local businessmen Mick and Barry Thandi applied for permission for a pub and a seven-room hotel at Castle Hill, site of an Iron Age hill fort and a Scheduled Ancient Monument.
The brothers had wanted to build a replica of a pub which stood at Castle Hill for 150 years but was taken down in 2005 following a planning dispute with Kirklees Council.
The proposed new pub would have stood in the footprint of the old one but their plans are in tatters after councillors rejected the scheme.
The planning committee was divided, with some councillors arguing the pub would add to what Huddersfield and Castle Hill have to offer.
But others said the green belt site should be protected from development. Opponents argued that the narrow road leading to the site would not be able to cope with extra traffic.
Eight councillors voted to reject the plans and seven voted in favour.
The issue also divided opinion among the public. Local councillors said they had received dozens of comments both for and against the pub plan.
Seventy one people wrote to the council backing the plan and 17 objected.
Some critics said the mock Victorian design would look “inauthentic and false” but supporters argued that a pub would enhance the visitor experience and be good for tourism,
Conservationists and historians were firmly against building a pub and hotel.
Members of Huddersfield Civic Society had urged the council to reject the plans.
The society said the pub building would “damage the visual and archaeological integrity” of the ancient monument.