A planning application for a recycling park in Rhuddlan has been withdrawn by Denbighshire Council after an objection from the Environment Agency.
The agency had asked the council to design the new site so it could deal with a "one in a thousand year" flood.
But the council said the cost was starting to outweigh the benefits of the location.
The proposed site, near Rhuddlan Castle, had attracted considerable opposition from local residents.
The plans had sited the unit about 600m (1,960ft) from the castle on the A525.
"It was a very unpopular plan, not just locally, but with Cadw and the Environment Agency"
The council said it had met Environment Agency officers to discuss developing suitable measures, but it had not been possible.
Steve Parker, head of environmental services, said: "The cost of the mitigation measures was starting to outweigh the benefits of using this location.
"The agency were predicting a flood depth of over one metre deep.
"Raising the level of the site by this much would have made it too visually intrusive, so we have decided to accept what the agency are saying, and withdraw the application".
The council said it would not be submitting any further planning applications for the site, and that it would be restored to its former condition.
In March, the vast majority of people at a public meeting objected to the proposals.
Vale of Clwyd MP Chris Ruane, who called the meeting, said of some 200 there, all but two voted against.
He called the decision a victory for "people power".
He added: "It was a very unpopular plan, not just locally, but with Cadw and the Environment Agency.
"I congratulate them [the council], and I'm really pleased that they have listened to local opinion and the professionals on this issue."
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