Tyneside Vineyard Church was informed by the City Council its proposals to move onto a derelict Greggs headquarters in South Gosforth lacked adequate safety measures for pedestrians.
Senior pastor David Bass told local newspaper the Evening Chronicle: "We were disappointed to receive the refusal notice, without any further communication, only days before Christmas.
"We had all been praying and hoping that the council would work with ourselves and Adderstone Group [local developers] to create a fantastic space that would be an asset to the local community, but it was not to be."
A growing congregation without a permanent home of its own, Tyneside Vineyard has been holding services in a civic theatre and a community centre.
Church leaders said the facility on Christon Road would have been "perfect" for their congregation and they hope to appeal the decision.
But Newcastle City Council said it was "concerned" about allowing members of the public onto a working industrial estate "without adequate pedestrian safety measures such as footpaths and crossing points".
A spokesperson added: "We therefore did not feel that we could support the application as submitted and it was refused."
According to Adderstone Group, Tyneside Vineyard would have unfairly needed to pay more than £59,000 on safety improvements for pedestrians.
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