The Welsh Government will not build the £1.4bn M4 relief road, First Minister Mark Drakeford has decided.
Mr Drakeford has axed the scheme because of its cost and impact on the environment.
The project would have seen a motorway built south of Newport to tackle congestion at the Brynglas tunnels.
The CBI called it a “dark day for the Welsh economy” but Friends of the Earth said it was “great news for Wales and the planet”.
It is the third time Welsh ministers have shelved plans for the M4 relief road, and is a U-turn on a manifesto pledge from 2016. At least £44m was spent on a public inquiry and other development costs.
Mr Drakeford’s decision to scrap the six-lane scheme follows a public inquiry by planning inspector Bill Wadrup, whose report backed the project.
The cabinet had already decided earlier this year that it would not fund the scheme, Mr Drakeford said.
He said that cabinet ministers in April concluded that the cost of the project was not acceptable due to “the financial position of the Welsh Government, the cost of the project, and its consequential impact on other capital investment priorities”.
The inspector concluded that the scheme would constitute “at least sound value for money, and in all probability good value for money”.
But Mr Drakeford added “the allocation of Welsh Government funds was beyond the scope of the public inquiry”.
“I attach greater weight than the inspector did to the adverse impacts that the project would have on the environment,” Mr Drakeford wrote.
“In particular, I attach very significant weight to the fact that the project would have a substantial adverse impact on the Gwent Levels… and their green network and wildlife, and on other species, and a permanent adverse impact on the historic landscape of the Gwent Levels.”
“In my judgement the project’s adverse impacts on the environment (taken together with its other disadvantages) outweigh its advantages.”
Jayne Bryant, Newport West Labour assembly member, said she was “deeply disappointed that an M4 relief road is not going ahead”.
“I am adamant that the money set aside for a relief road must be spent on resolving this problem around Newport,” she said.
But Friends of the Earth Cymru director Haf Elgar said: “This is a great news for Wales and the planet.
“As well as costing Welsh taxpayers over £2 billion pounds, this devastating road would have ploughed through the unique, wildlife-rich Gwent Levels, pumped more climate-wrecking emissions into our atmosphere, and ultimately caused even more congestion and air pollution.”
CBI Wales director Ian Price said: “After decades of deliberation and over £40m spent, no problem has been solved today.
“Congestion and road pollution around Newport can only increase. Economic growth will be stifled, confidence in the region will weaken and the cost of an eventual relief road will rise.”
Opposition AMs were scathing. Russell George, Welsh Conservative AM, said the announcement was a “kick in the teeth for Welsh commuters”.
Plaid Cymru which had long opposed the scheme, said it showed the party was “right all along” but leader Adam price accused the Welsh Government of “eight years of dithering”.