Deputy Prime Minister John Prescott has thrown out a bid to build 260 homes in Hitches Lane.
Mr Prescott has backed a recommendation by government planning inspector David Ward to dismiss an appeal by Berkeley Strategic Land.
The Cobham-based developer appealed against Hart Council's non-determination of its plan for the houses along with sports pitches and a riverside footpath on the Hitches Lane site.
An inquiry into the plan was held at Hart's Fleet headquarters in April.
More than 100 campaigners packed into the council chamber to show their opposition to the application.
Many were forced to stand as Mr Ward adjourned the inquiry for about ten minutes while an adjoining committee room was opened to take the extra people.
In his report, Mr Ward said he thought the appeal site was well located if an extension to the built-up area of Fleet is necessary.
He pointed out the site was opposite the Hart Leisure Centre and Calthorpe Park School and would be close to the shopping and community facilities when they are built at nearby Elvetham Heath.
"I agree with those who considered public transport services at present to be inadequate — they are grossly so," states Mr Ward in his report.
"But the appeal proposal offers the opportunity for a new start to be made with a funded service, at a time when the opportunity to use a private car to access the railway stations is becoming limited."
But Mr Ward warned: "I accept that there are planning objections to extending the developed area into the countryside."
The report adds: "The rate of house building nationally has slowed to an historically low level.
"National statistics do not in my view provide a reliable indicator of local needs.
"Development at Elvetham Heath alone will bring new housing to the market every year to 2006, equivalent to the whole output from the appeal site, providing a substantial response to local need."
Peter Bates, a decision officer at the Office of the Deputy Prime Minister, has backed Mr Ward's recommendation.
He said the Hitches Lane site is allocated as a reserve housing site in Hart's Replacement Local Plan, which would only be developed if there was less than five years' housing land supply available.
"However, the Replacement Local Plan has not yet been adopted and there have been a significant number of objections to the inclusion of this site as a reserve site," states Mr Bates.
"The Secretary of State agrees with the inspector that to pre-empt the Local Plan process by allowing the appeal at this stage would bring the plan-led approach into disrepute."
Campaigners say they are delighted with the result.
"We are very pleased — it's what we wanted," said Stuart Jones, a member of the Fleet Development Boundary Action Committee, a local residents' group strongly opposed to land at Hitches Lane being developed.
"The inspector even mentions in his report that he was impressed with the number of people who turned up to oppose the plan.
"The objections to the Local Plan are only being considered now and will go to the council's cabinet in October.
"Everything is still on the table," warned Mr Jones, who spoke against the plan at the inquiry. "We have just won one battle in the whole war."
Campaigners say Hitches Lane has historically been the strong defensible settlement boundary to the western edge of Fleet and fear if the plan goes ahead it would open the floodgates for further development on the site, stretching close to the borders of Winchfield, Dogmersfield and Crookham Village.
Hart councillor Sean Holden, whose Fleet West ward covers the Hitches Lane site, said: "The campaigners should be congratulated.
"It is an important victory because it would be a strategic disaster to start developing outside the Fleet settlement boundary. Once it starts there will be no stopping it.
"However, the battle will go on because the developer will come back for more."