Moonlight Movies Ltd applied to convert a field at Crossgates into a drive-in cinema, featuring a screen and projection tower, for up to 200 cars.
The company has been operating a temporary cinema at the site using an inflatable screen.
Councillors were recommended to refuse consent due to concerns about noise.
Planning officials told the council the applicant could use the site as a drive-in cinema for up to 28 days a year without requiring planning permission.
A council report said more than 50 letters of objection had been received, mostly concerned about noise from the site.
The company told the council that sound would be provided through car radios, not external speakers.
It planned one nightly showing which would finish at around 23:30 BST in the summer and 22:30 GMT in the winter.
Tourism officials were supportive of the plans, saying it would offer a unique attraction that visitors could attend, and 25 individuals wrote in support of the application.
Speaking after the meeting, the chair of the planning committee, councillor Jane Mortimer, said the cinema was a "brilliant idea but in the wrong place".
Ben Stonehouse, of Moonlight Movies, said he was "very disappointed" with the decision and was unsure of the future of the cinema.
He said: "We would have liked to keep the business in Scarborough but the council seems set against us.
"It has been a really good tourist attraction for the town. We've had people coming from as far as Sheffield."
Plans for a permanent drive-in cinema on land near Scarborough have been rejected by councillors.