Despite promises by U2 guitarist The Edge that it would be one of the greenest developments in the world, California's coastal development agency rejected a proposal for five mansions overlooking Malibu citing concerns that it would irrevocably damage the environment.
Staff told the California Coastal Commission that approving such a project would set a precedent and invite other large developments to rugged, environmentally sensitive locations.
Commissioners voted eight to four against the proposal.
"In my 38 years I have never seen a project as environmentally devastating as this one," said Peter Douglas, executive director for the commission.
"An environmentally sensitive person would never pick this site to develop."
Following the vote Fiona Hutton, spokeswoman for the property owners, said they would be "vigorously exploring all potential options including litigation.
"The property owners worked diligently to develop home designs that would meet some of the highest standards for sustainability, blend seamlessly with the natural landscape and preserve the vast majority of their private lands as open space," she said.
The proposal led by the musician, whose real name is David Evans, called for five multilevel homes of up to 12,785 square feet to be built on 156 acres in the Santa Monica Mountains.
Project designers said the homes would have the top green building certifications and the guitarist said the mansions would be some of the most environmentally sensitive in the world.
Project opponents, including the National Park Service, however, said the development would scar the expansive ridgeline.
The musician and his partners had earlier appeased one of its staunchest opponents, the Santa Monica Mountains Conservancy, after agreeing to give the agency more than $1m (€706,443), dedicate nearly 100 acres to open space and provide public access to hiking trails if the homes were approved.