Developer Land & Lakes sought outline permission for the construction of a 500-unit leisure park including cottages, lodges, a waterpark and other facilities at the Penrhos Coastal Park in Holyhead.
Its hybrid application to Isle of Anglesey County Council also proposed the creation of an annex to the park at Cae Glas with an additional 300 units, along with a hotel and restaurant facilities, that would have initially been used use as worker accommodation for the construction of the proposed Wylfa B nuclear power station.
A further development of up to 360 homes at Kingsland would have initially also provided construction-worker accommodation, before being converted for open-market sale.
The only aspect of the scheme for which full permission was sought was the conversion of some of the sites’ existing buildings for leisure-related use.
Anglesey Council planning officers had recommended the scheme for approval, subject to the finalisation of a Section 106 agreement and an extensive list of conditions.
A planning report said a need had been demonstrated for the scheme, and that its economic benefits weighed heavily in its favour.
"Economic development is a factor which is stated in government policy (Planning Policy Wales) to be given significant weight in decision making," the report said.
"The economic benefits that will result from the development proposals are significant and the council agree with the applicant that they are likely to provide a ‘stepchange in the economy of the Isle of Anglesey’.
"The proposals will create a significant number of job opportunities; they will assist in regenerating the local economy and promoting growth and regeneration.
"In terms of the tourism and worker accommodation element the economic benefits are significant."
However, members of Anglesey Council’s planning and orders committee rejected the application on the grounds that it would have a "detrimental effect on the Area of Outstanding Natural Beauty and lead to over-development".
A statement from Anglesey Council said the application had been the largest ever considered by the authority, and that as councillors had gone against officers’ advice the decision would be subject to a one-month "cooling off period", in line with the authority’s constitution, before returning to the committee for ratification.
It added that Land & Lakes now had the option of launching an appeal.
No-one was available for comment from Land & Lakes or agents HOW Planning.