The Environment Minister has conceded an appeal against Le Masurier's £120m plans for an apartment and hotel complex in the heart of St Helier.
The Les Sablons development on Broad Street and Commercial Street was refused planning permission last December.
An appeal to the Assistant Environment Minister Deputy Hilary Jeune was also refused, despite an independent planning inspector recommending it be approved.
Le Masurier wants to put nearly 240 apartments and a 103-room hotel on the site.
Last month, the developer said it would launch a legal challenge.
Managing Director Brian McCarthy told Channel 103 that the firm's lawyers felt they had a strong case, and that he had been overwhelmed by public and industry support.
"I have been inundated by emails and comments from the public, reciting the obvious benefits of Les Sablons in terms of housing, tourism, regeneration and place-making, and that has given us an encouragement to fight for our case."
However, a decision today from the Environment Minister means Deputy Jeune's decision has been overturned.
"The Minister for the Environment has conceded the appeal and therefore the decision to dismiss the planning application appeal for the development of Les Sablons has been quashed and will now be remitted back to the Minister for the Environment for further consideration."
It means the minister will now reconsider the application and announce a decision 'in due course'.
The government says no further comment can be made at this stage.
Mr McCarthy have us his reaction:
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