A $250 million revamp of the Melbourne tourism hotspot, Queen Victoria Market, has hit a hurdle with the state's heritage authority rejecting controversial redevelopment plans.
Custodians City of Melbourne will appeal Heritage Victoria's decision to veto plans to restore the site's 140-year-old sheds and excavate for an underground car park.
Council was "blindsided" and "baffled" by the rejection, with acting Lord Mayor Arron Wood claiming the move would put thousands of construction jobs at risk.
"This is a major blow to the renewal, but we will appeal the decision," Cr Wood told ABC Radio on Wednesday.
Planning Minister Richard Wynne urged council to go back to the drawing board and work with government and Heritage Victoria to find an "appropriate solution" by submitting a revised plan.
"This is one of only a handful of open-stand markets left in the world," Mr Wynne told reporters.
"We want to continue working with (council) to ensure that we do redevelop the Queen Victoria Market in a way that is both sympathetic and absolutely respectful of the rich heritage."
But the council has rubbished the heritage body's concerns the integrity of the sheds couldn't be guaranteed.
"There is extensive expertise in heritage restoration, and I have full confidence that those fantastic experts in this area would comfortably be able to restore these heritage sheds," Cr Wood said.
Heritage Victoria had been considering the plan since September and received thousands of objections as local traders organised a high-profile protest rally in December.
"It is now time to look at the alternative plans," Friends of the Queen Victoria Market said in a statement.
The Queen Victoria Market has traded continuously since 1878 and attracts almost 10 million visitors a year.