The application was for three retail premises with three residential dwellings at 63 Piper Street at the intersection of Powlett Street.

A report, prepared by council officers and presented at last week's council meeting, recommended the application be supported as it was considered appropriate for the area that is in a Business 1 zone.

But an alternative motion, put forward by South Ward councillor Rob Guthrie, to turn down the application, was carried.

The application was rejected on the grounds that the proposal was not in keeping with and would not contribute to the established heritage precinct, would detract from the established heritage streetscape due to its mass and bulk, had a design inconsistent with the planning objectives of the shire, and was considered an overdevelopment of the site.

Barry Murphy , who along with his wife Ruth was among the objectors, said many members of the community were concerned the development would affect the Piper Street streetscape and obstruct views of heritage buildings, including Kyneton Museum and St Paul's Anglican Church.

"You can see the museum from 150metres back and there's a terrific view of the church from Piper Street. I think Piper Street is so important to the community, and even to the state, that to take away from it would be a great shame. The views to these landmarks are important and it is essential to preserve those views."

Mr Murphy, who owns a building in Piper Street and has had a family connection to the street since 1953, said the site of the proposed development was surrounded by buildings on the National Trust register.

"I was very pleased councillors listened to the community and what they did want. I could find you at least 100people who didn't like it. The community was very upset about it and there was no doubt they were opposed to it."

He hoped the council would draw up a policy that would preserve and protect views in Piper Street.

"I'm not opposed to development. I think without development the town dies. But this huge building that was to go on that sire was inappropriate."

Reverend Tony White, of St Paul's Anglican Church, one of the oldest churches in the Central Highlands area, said it was pleasing the council had rejected the proposal in its current format.