The Lodge Farm, Brinklow and Coton House housing plans should be axed from the Local Plan, said Government inspector Mike Hayden.
Mr Hayden made the recommendations in a letter he wrote to Rugby council after the recent second round of Local Plan hearings ended.
In the letter, which Rugby council received today, Mr Hayden said that, subject to further public consultation and sustainability appraisal, the Lodge Farm, Brinklow and Coton House allocations of housing should be removed, with additional housing on the proposed allocations at Long Lawford and Binley Woods to compensate.
He further states that additional protection should be given to the Brandon Stadium site, and land should be set aside for two years in case it is needed for a possible secondary school at Coton Park East.
In the letter Mr Hayden argues the proposal to build 1,500 homes at Lodge Farm in Daventry Road near Grandborough is not sound.
He states: "I am not persuaded it is a location which could be made sustainable in transport terms.
"It is not apparent that Lodge Farm would support existing surrounding rural communities to any significant extent, since its local facilities would be scaled to serve the needs of the new community.
"The development of a new settlement of 1,500 dwellings in this setting, even with the inclusion of landscaping and green space, would cause significant harm to the intrinsic beauty and character of the countryside in this part of the borough.
"Whilst it would provide additional market and affordable housing and support new transport and secondary school infrastructure within Rugby, Lodge Farm is not required to meet those needs.
"I find that the allocation of Lodge Farm as part of the Plan’s development strategy is not positively prepared, justified as an appropriate site, effective in addressing the cross-boundary unmet needs of Coventry or consistent with national policy in enabling the delivery of sustainable development.
David Thompson, chairman of campaign group Stand Against Lodge Farm Village (SALV), said: "It's wonderful news. I am very pleased that the inspector has recognised the strength of the arguments we have made since the proposal was put in the draft local plan."
John Tautu, also from SALV, said: "I'm absolutely blown away. I think we are just extraordinarily relieved that reason has prevailed. It's been a very long and difficult road for us and the council had refused to listen to reason - which had been very disappointing."
Representative of Leam Valley Ward and portfolio holder for Communities and Homes Cllr Emma Crane said: "Whilst I’m so pleased that the Inspector has recommended that Lodge Farm be scrapped from Rugby’s Local Plan, when the dust settles from the celebrations in Leam Valley I do think that serious questions must be asked of those in Rugby Borough Council who championed this proposal against all logic.
"Lodge Farm never made sense. I have objected from the outset and repeatedly pressed for it to be removed from our Local Plan.
"It’s great news that the Inspector has done what Rugby Borough Council wouldn't and removed it however it is wrong that my constituents had to put up with two years of worry, hours of hard work and had to spend thousands of pounds of their own money to see Lodge Farm taken out when it should never have been in in the first place. "
Cllr Heather Timms, Rugby Borough Council portfolio holder for growth and investment, said: “Residents, parish councils, developers and other partners have all had the opportunity to make representations to the inspector for independent consideration against the requirements of the town and country planning regulations.
“These initial findings from the planning inspector show that he has considered carefully all of the evidence before him, as was our wish when councillors agreed to submit the plan for examination.
"They are another significant step towards delivering planned, sustainable growth with the supporting roads and other infrastructure that we need.”
The “main modifications” should be included in a public consultation alongside a series of other modifications that were proposed during the course of the public hearing sessions that were held at the beginning of the year.
Once the wording of the proposed modifications has been agreed with the inspector they will be the subject of a six week public consultation. Responses will be considered by Mr Hayden when he prepares his final report.
Further information on the local plan, along with a copy of the inspector’s letter to the council, can be found at www.rugby.gov.uk/localplan.