The BBC's governing body confirmed today it refused permission for the corporation's proposed online local video service.
The BBC Trust's final decision follows a public consultation on its provisional conclusions published in November to reject local video.
It found the plans would not improve services for the public enough to justify either the investment of licence fee funds or the negative impact on commercial media.
The proposed service would have provided an extra tier of local news, as well as featuring sport and weather and user-generated content.
The plans involved on demand video being made available via broadband connections.
But regional newspapers criticised the proposals for an enhanced network of 65 websites across the UK, saying they would represent unfair public-funded competition.
The BBC Trust concluded a public value test and said the BBC's priority should be improving the quality of regional services which already exist.
BBC trustee Diane Coyle said: "The trust is committed to improving regional and local services from the BBC for licence fee payers but a broadband-only local video news proposal is unlikely to achieve what they want.
"Instead, we believe the BBC's priority should be improving the quality of existing regional services.
"We recognise that the ways of achieving this may vary in different parts of the UK.
"We have asked the executive to come back to us with new proposals later this year which will then be fully scrutinised by the trust."
The BBC has already unveiled a list of partnership proposals with other broadcasters, including sharing expertise with local media.
Funds totalling £68m that would have covered the four-year period from the launch of local video have been ring fenced pending any new proposals, subject to trust approval.Reuse content