The Welsh Government cabinet has decided not to financially back the proposed Circuit of Wales racetrack at Ebbw Vale.
The company behind the project wanted the Welsh Government to provide a £210 million taxpayer-funded guarantee.
But in a statement, the Welsh Government said it "is unable to offer the financial guarantee requested on this proposal."
As part of the same statement, the Welsh Government did say it would be "committing to building a new automotive technology business park in Ebbw Vale, with funding of £100million over 10 years."
It said this would create 1,500 new jobs.
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Developers for the Circuit of Wales, meanwhile, claimed the £425m project near Ebbw Vale in Blaenau Gwent could create 6,000 jobs in one of Wales' most deprived areas. The Welsh Government said it thought that figure would be 'little over 100'.
The Welsh Government has already provided over £9.3 million of taxpayers money to support the development of the motor racing circuit.
In April 2017, the Auditor General for Wales criticised the Welsh Government for 'significant shortcomings' in the way it has managed the multi-million project.
The Welsh Government said it was disappointed by the findings of the report.
A decision from the Welsh Government as to whether it would financially back the project was expected to be made earlier this year however the deadline was extended.
Economy Secretary Ken Skates said the government needed an additional 'few weeks' after they identified 'material gaps and inaccuracies' in the Circuit of Wales application.
Martin Whitaker, chief executive of The Circuit of Wales, said he was "disappointed and saddened" the Welsh Government "failed to support what would be a game changing development for Wales."