Liverpool City Council has called local government Secretary of State Eric Pickles' decision to turn down the proposed £15m redevelopment of the Welsh Streets "unacceptable political interference".
In January Pickles overturned a planning inspector's recommendation that the scheme be given the green light. Plans included the demolition of 271 houses to make way for 154 new and 37 refurbished homes.
In his decision letter at the time, Pickles said he supported arguments put forward by campaign group Save Britain's Heritage. He said: "The Secretary of State is not persuaded that the scale of demolition proposed in this case has been demonstrated to be necessary and that sufficient forms of market testing and options involving more refurbishment have been exhausted."
The streets outlined for redevelopment by the council were Rhiwlas Street, Voelas Street, Kinmel Street, Admiral Street, Gwydir Street and Treborth Street.
The rejected proposals were the first phase of a project which would have seen the demolition of 400 properties in total, with 40 houses retained in the Welsh Streets, including the birthplace of Beatles' drummer Ringo Starr. The network of streets was initially built in the 1870s for Welsh workers moving to Liverpool.
Cllr Ann O'Byrne, assistant Mayor and cabinet member for housing, said: "We are not prepared to stand by and see Eric Pickles ignore local people and his own independent planning inspector.
"The long-suffering residents of the Welsh Streets have now been waiting more than a decade for new homes and we are standing up against this unacceptable political interference from Whitehall and challenging the decision.
"This scheme was carefully developed and supported by the vast majority of local people in a thorough and detailed consultation."