Mexican President Felipe Calderon says he is cancelling the construction of a huge tourist resort in Baja California over concerns it could damage a nearby marine reserve.
Mr Calderon said he had withdrawn the permits from the Spanish developers.
He said developers Hansa Baja had not been able to prove the planned resort would not harm the environment.
Activists said it would have damaged the Cabo Pulmo coral reef and park, a haven for marine life.
Speaking from his official residence, President Calderon said that “because of its size we have to be absolutely certain that it wouldn’t cause irreversible damage, and that absolute certainty simply hasn’t been proved”.
Mexican authorities had granted Hansa Baja initial permits to build about 30,000 hotel rooms, two golf courses and a marina near the tip of Baja California.
The 9,400-acre (3,800-hectare) project, called Cabo Cortes, caused concern among many locals and environmental groups.
The activists said it would threaten Cabo Pulmo National Marine Park, which has some of the best preserved coral reef in Mexico’s Pacific region.
The park is home to more than 200 fish species and was designated a Unesco World Heritage Site in 2005.
Environmentalists, who had protested against the development for years, welcomed Mr Calderon’s announcement.
The head of the WWF environmental group in Mexico, Omar Vidal, said that it sent “an important message to Mexican and international investors that this type of tourist development based on mass scale and golf courses is no longer acceptable in Mexico”.
President Calderon said that investors were free to start again with a project which was compatible with the marine park’s sustainability.
But he stressed that the mega-project as originally conceived was off the table.
“To sum it up, Cabo Cortes won’t be built,” Mr Calderon said.
Investors Hansa Baja have not yet commented.