The authority’s planning department had recommended refusal over the potential impact of the scheme on the environment.
The development site had not been allocated as part of the council’s local housing plan and was deemed to negatively impact designated wildlife.
It was also found the plans offered an ‘inability to protect’ the nearby Quarry Lane Nature Reserve.
Concerns were raised by Nottinghamshire Council, as the highways authority, over access proposals.
In issuing the refusal last year, councillors wanted to put a ‘strong’ report together to ensure the plans do not return in the future.
However, applicant Lee O’Connor appealed against the council’s decision and a public inquiry was held by the Government’s planning inspectorate .
Now the inspectorate has issued its verdict and deemed the plans ‘unacceptable’, meaning they will not go ahead.
In her report, inspector Siobhan Watson said: “While there are some benefits to the scheme, including the provision of market and affordable housing, these do not outweigh the cumulative harm I have found.
“The loss of the green infrastructure, whatever type of habitat existed, and the harm to local greenspace and community open space, are sufficient to make the scheme unacceptable even without the additional biodiversity harm.
“The proposal, therefore, conflicts with the development plan as a whole and does not represent sustainable development.”
The news has been welcomed by councillors.
Coun Andre Camilleri, county council member for Mansfield South, said: “It’s a fantastic result because it saves these nature reserves for the future. Mansfield hasn’t got much heritage but this is one of them.
“This shows what you can do by working together, with the result being something that’s better for the people of Mansfield.”
Coun Robert Elliman, district councillor for Oakham ward, said: “It’s great news, many thanks to everyone who helped us get the right result.”
Mr O’Connor could not be reached for comment, but previously described his plans as an ‘exceptional residential environment’ which ‘embraces ecology and the needs of the wider community’.
He said: “As we look to post-pandemic recovery, Mansfield needs to be shouting louder than other areas in attracting that much-needed investment.
“Projects like Gregory Quarry are important in building confidence, attracting and supporting wider investment to the Mansfield area.”
Coun Stuart Richardson, district council portfolio holder for regeneration and growth, said: “We are pleased this decision has recognised the importance and value of retaining areas of green space within an urban environment.
“Even though this quarry is not open to the public, it still represents a valuable natural asset in this part of Mansfield and its continued presence also enhances the quality of local green and open spaces around it.
“Yes, we need more houses, but this should not be at any cost. Green corridors are also an important feature of any urban landscape.”