RWE Innogy wanted to use water from the River Conwy to supply its proposed hydro power project at Betws y Coed.
The firm said it would have had a positive impact on the environment but campaigners were worried half an acre of the centuries-old Fairy Glen Wood would be destroyed by the build.
Snowdonia National Park Authority rejected the proposals on Wednesday.
The project would have taken water from the river above Penmachno bridge and diverted it through more than half a mile (1km) of pipeline around Fairy Glen to generate electricity, before returning it to the river near the River Lledr junction.
It would have been capable of generating enough power for about 3,200 homes a year.
Billy Langley, of RWE Innogy UK, said he was "extremely disappointed" with the authority's rejection of the plans, which he said would have had a positive impact on the local environment and economy.
"In light of this decision, we will now take some time to consider our options," he added.
Controversial plans to build a £12m hydro electric scheme at a beauty spot in Conwy Valley have been refused.