Mr Justice Green, ruled in London this morning that the Gedling Borough Council had wrongly failed to treat plans for a cemetery as "inappropriate" in the green belt.
Plans that come under that category require "very special circumstances" to justify them, he said.
Now the council will have to reconsider the application put forward by the Westerleigh Group Ltd for the green belt site at Catfoot Lane, Lambley.
The May 2013 decision came under challenge in court from a rival, the A.W. Lymn Family Funeral Service Ltd, which had put forward its own proposal for a crematorium at Orchard Farm on Catfoot Lane.
Local woman Jean Timmins, 69, a retired civil servant and member of campaign group the Catfoot Crematorium Opposition Group also opposed it.
The judge said that the Lambley Dumbles is an area of rolling farmland and deep wooded valleys that runs from the Mapperley Plains towards the ancient village of Lambley, an area popular with walkers that is "reputed to have been visited by D.H. Lawrence"
He said the council had "clearly erred" in its interpretation of the National Planning Policy Framework, and wrongly considered that cemeteries fell within an exception to the rule that new development is inappropriate in the green belt without very special circumstances.
Quashing the decision, and ordering the council to reconsider the application, he said: "In my view a change of use from agricultural land to a cemetery constitutes a development which is prima facie ‘inappropriate’ and to be prohibited in the absence of ‘very special circumstances’."
He rejected the council’s claim that this error was "immaterial" to its decision, adding: "The error is, in my view, fundamental."
And he ruled that, though a direct rival that could be regarded as a "disgruntled" or "disappointed" competitor, Lymn was entitled to bring proceedings.
However, he rejected an additional claim that, in considering the crematorium, the council had misdirected itself as to the meaning of "openness" when considering the impact on openness that would result.
He found that the council did not commit any material error of law in this respect.
Adding that, on reconsideration, planning permission may well be granted again, he said: "For the avoidance of doubt nothing in this judgment indicates any view whatsoever as to the merits of the decision to be re-taken."
David Heales of Clyde & Co, which acted for the claimant, said: "The case provides helpful clarity in respect of two common mistakes made in the context of decision-making.
"The finding in respect of the meaning of paragraph 89 follows a similar finding in another case and establishes an important change in Green Belt policy. The finding in respect of Article 31(1)(cc) confirms that the new requirement is more than a tick-box exercise."