Wyevale wanted to rebuild its centre in Upper Poppleton, creating a new 5,823 sq m store and 90 jobs, but City of York Council said the scheme would damage the greenbelt.
Planning agent for Wyevale Shirley Karat said:
"I think it's very sad in these economic circumstances, where we should be promoting economic development and creating jobs, that the planning policies do not reflect that."
Karat said the firm's finances were not an issue: "It was purely because council officers were going to recommend refusal that we withdrew," said Ms Karat.
It is the second garden centre scheme in York to fall through in recent months.
In October, councillors denied Dobbies permission to build a centre near York Designer Outlet, a move that the firm said would create 140 jobs.