The hospital will remain barred following the decision

Developers wanted to build 280 homes on the Denbigh site, alongside small businesses and community facilities.

The hospital has fallen into disrepair since it shut 10 years ago and many locals wanted to see new life breathed into the Grade-II listed building.

In rejecting the scheme on Thursday councillors went against the advice of planning officers.

Prince Charles had also recently warned that the Victorian building was being "squandered".

Disappointed

Denbighshire's chief planning officer Graham Boase had advised councillors to approve the scheme on Thursday.

Mr Boase said the proposal by Acebench Investments offered a chance to breathe life into the historic site before its key assets were lost.

However, councillors voted by 13 votes to 12 to reject the scheme by the Lancashire-based owners.

One councillor described the proposals as "too vague" and others expressed fears about the impact of the scheme on the town's Welsh language and culture.

Ayub Bhailok, the developer and owner of the site, who was at the meeting, said it was "very disappointing news" but he added that he would not give up on the hospital.

The hospital closed 10 years ago

The plans for the Grade II-listed building had been backed by the Welsh Development Agency and Prince Charles' restoration scheme, the Phoenix Trust.

However, opinion has been divided amongst local people with a number calling for it to be knocked down.

As well as 180 newly-built homes and 100 converted ones, the proposals involved a mixed use for the 120-acre site, including business units and open spaces.

Sharon Braunton, chair of Denbigh town business group and local shop owner has backed the scheme.

"It's a shame that something positive has been rejected but they must have their good reasons," she said.

The former psychiatric hospital has fallen into disrepair and has been vandalised since it closed in 1995.

The building is recognised as a pioneering example of early Victorian asylum architecture.