The £50 million Lime Street scheme has been dogged from the start, and this most recent move by the DCLG almost certainly spells the end for the mixed-use tower.
Developer Chieftain Construction had lodged an appeal with Liverpool City Council when the scheme was originally rejected more than a year ago.
In an attempt to ease concerns over tall buildings, Falconer Chester Hall reduced the height of one of the scheme's two towers to 34 storeys.
The scheme also included a 160-room hotel, 153 residential apartments, a car park and commercial elements.
But despite the amended proposals, CABE and English Heritage recommended to Liverpool council that it reject the application for design quality and for lacking 'contextual analysis of the site'.
In a letter to Chieftain Construction's solicitors, the DCLG said it judged the development, which borders Liverpool's World Heritage Site, as 'fundamentally flawed'.
The letter continued, saying that the plan to create a 'cluster of tall buildings on one side of, and beyond, the distinctive grouping of tall buildings on the plateau to the west of Lime Street Station-would run the risk of diluting the essence of the character of the area, both historically and visually.'