Federal Environment Minister Tanya Plibersek has made a final decision to block the Clive Palmer-backed Central Queensland Coal Project under Australia's national environmental laws.
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This is the first ever refusal of a coal mine in Australia under national environmental law.
The proposed mine was less than 10 kilometres from the Great Barrier Reef and would involve building two open cut pits to extract up to 10 million tonnes of coal per year.
The extracted coal was going to be used for steel production via overseas export.
"I have decided not to approve the Central Queensland Coal Project because the risks to the Great Barrier Reef, freshwater creeks and ground water are too great," Ms Plibersek said.
"Freshwater creeks run into the Great Barrier Reef and onto seagrass meadows that feed dugongs and provide breeding grounds for fish."
In her first major decision as Environment Minister, Ms Plibersek had last year made a proposed decision to reject the application for the mine under the contentious Environment Protection and Biodiversity Conservation Act.
This earlier decision was due to likely "unacceptable impacts" to the Great Barrier Reef, and was a first ever refusal of a coal mine by a minister.
The earlier rejection was open for public consultation, of which the department received 9000 comments, with more than 98 per cent of submissions supporting the proposed rejection.
Ms Plibersek said she blocked the application due to concerns around the potential for increased sediment being released into the Great Barrier Reef World Heritage Area.
The federal government is overhauling the Environment Protection and Biodiversity Conservation Act with reforms expected later this year.
It includes establishing a new Environmental Protection Agency and a significant focus on climate change.
Ms Plibersek had last year described Australia's environment laws as being "broken".
The move was welcomed by the Australian Conservation Foundation which said Queensland's future was in renewable energy, "not as a coal quarry".
ACF spokesperson Jaclyn McCosker said it was a "win" for the community that had been campaigning to protect the Great Barrier Reef.
"In the third decade of the 21st century we simply cannot be approving new coal mines," Ms McCosker said
"We urge Minister Plibersek to keep listening to scientific experts and the community and reject the dozens of other coal proposals waiting for final approval."
