The Tucson City Council voted unanimously Tuesday to deny Walmart at El Con Mall a beer and wine liquor license.
The retailer can appeal the decision to the state liquor board as it prepares for its fall opening, City of Tucson spokesman Michael Graham said.
El Con demolished the old Macy's store on the site last year, and Walmart started construction on its new store.
The City Council approved the store's development plan in 2011 despite opposition from the El Encanto Estates Neighborhood Association.
A Pima County judge last year ruled the city's big-box ordinance, passed in 1999, could not keep Walmart from opening.
The judge's ruling was not appealed by an Aug. 6, 2012 deadline, allowing construction to begin.
The new store is being built at the west end of the mall at 3601 E. Broadway. It will face El Encanto Estates.