The village of Stilton in Cambridgeshire has had its bid to make its namesake cheese rejected.
Under EU law, Stilton can only be produced in Leicestershire, Derbyshire and Nottinghamshire, where it thought the cheese originated.
The Bell Inn in Stilton already makes a blue-veined cheese but has been forced to call it Bells Blue instead of Stilton, due to the EU ruling.
The Original Cheese Company had sought to have the EU ruling amended to include the village of Stilton.
The group's director Richard Landy claims historical documents prove the strong-smelling blue-veined cheese originated in the village. But the Department for Environment, Food and Rural Affairs has rejected the application to amend the Protected Designation of Origin (PDO) to include Stilton.
It said the claim was rejected because the application was submitted by the Original Cheese Company and not the pub.
Liam McGivern, landlord of the Bell Inn, accused Defra of moving the goal posts and said they would press on to get the ruling amended.
He said: "We hope it's not the final decision and we're hoping Defra will re-assess the situation.
"Defra are moving the goalposts. They have rejected the application just because the Original Cheese Company registered the application and not us.
"It's ridiculous that we can't make Stilton in Stilton. People come in and ask for it several times a week and I have to tell them we can't legally call it Stilton."
He added: "We're going to press on with our fight".
Mr Landy said they would be writing to Environment Secretary Owen Paterson for his support.
"Defra's initial restrictions were so woolly. And as far as we were concerned we fulfilled the requirements," Mr Landy said.
However Matthew O'Callaghan, from the Melton Mowbray Food Partnership, welcomed the decision by Defra.
Mr O'Callaghan said: "I'm delighted at Defra's decision. Stilton Cheese originated in the Melton Mowbray area and not in the village of Stilton."