Everton's plans for a new stadium at Kirkby have been rejected by Communities and Local Government Secretary John Denham.
The club and Tesco had hoped to build a new stadium and a shopping complex, in a move that would have seen Everton leave their long-time home, Goodison Park. Everton chief executive Robert Elstone said the decision had left the club "bitterly disappointed" but stressed it did not mean the end of the search for a new home.
In August 2008 the Government announced the stadium plans would be 'called in'. The planned development, including a 50,000-seat stadium, was then examined during a public inquiry that took place between November 2008 and February 2009.
A majority of Everton supporters - 59.27% - backed the move and Knowsley Council was also firmly behind the project, with councillors in favour by 20 votes to one. However, Everton must now reassess their options after their preferred location was ruled out.
Elstone said on the club's official website: "Obviously, we are all bitterly disappointed with the decision as we felt that - along with our two partners - we had compiled and presented a most compelling case for the Destination Kirby project.
"We said all along that we not only believed the project to be deliverable but that it would have proved to be hugely beneficial for both Everton Football Club and the people of Knowsley.
"We will now regroup and carefully consider the options which are open to us. I feel I must stress that we do remain totally committed to finding a new home for our football club. The hunt for that new home will now intensify."
Councillor Ron Round, leader of Knowsley Council, said: "We are sorely disappointed with the decision made by the Secretary of State which means that this important regeneration scheme will not go ahead.
"This development would have resulted in many thousands of jobs being created, alongside a range of new facilities and investment coming into the borough."