Communities Secretary Eric Pickles has ruled that Cheshire East Council was right to refuse planning permission for the proposed Covanta plant on land off Pochin Way, in Middlewich.
The incinerator would have burned waste to create electricity and combined heat and power to sell commercially.
Cllr Michael Jones, leader of Cheshire East Council, said: "When I was portfolio holder for resources I was asked, following our decision to refuse the incinerator application, whether I was prepared to take the financial risk of fighting this appeal – and I said 'yes'.
"As a Conservative I support the rights of local people. And I think this is a great victory for Cheshire East and the people of Middlewich.
"I say well done to the Cheshire East members who fought this, well done to the people of Cheshire East and well done to the Cheshire East Council officers who have worked so hard on this."
Cheshire East Council's Strategic Planning Board unanimously refused planning permission for the Covanta plant in April 2010. There were more than 3,300 letters of objection submitted to the council.
Councillors said the application has not been identified as part of the Waste Local Plan, a need has not been established and the proposal was unsustainable as it would have drawn in waste from outside Cheshire.
The council also ruled that the visual impact of the incinerator, which would have had an 80m chimney, would outweigh the benefits and Covanta had not demonstrated how energy would be exported from the site.
Fears of increased traffic congestion were also raised by well-organised local residents' action group, Cheshire anti-incinerator network.
The Council's decision was appealed against by Covanta and a public inquiry was held in 2011. The inquiry sat for 23 days over March, May and October 2011.
The Secretary of State has now announced his decision, which is a vindication of the Council's planning strategy and planning decision making.
The Secretary of State agreed with the council that:
- The site is not allocated for waste development and preferred sites should have been considered
- The incinerator would be likely to provide an oversupply of facilities
- There would be an effect on European protected species
- There would be an effect on landscape
The Secretary of State found that the appellant had, by submitting information during the inquiry, provided sufficient information to enable him to assess the grid connection and CHP supply.