But Weymouth and Portland borough councillors voted to fight the proposals. Councillors claimed the ship would spoil views of the harbour, destroy the area's reputation as a tourist resort and deter new industry.
With two prisons located in the area, residents have voiced fierce opposition to the Resolution being moored in the former naval docks. A Labour councillor, Bob Beare, said: "We have been promoting this area for tourism and are seeking World Heritage status for our coast."
The Prison Service does not need planning permission to build a new prison but it would be reluctant to override strong local opposition. On Wednesday, its plans were rejected by the council's planning committee. South Dorset MP Ian Bruce immediately wrote to the town's Chief Planner Richard Burgess.
Mr Bruce said the ship would bring up to 320 badly needed jobs to Portland, which has suffered badly from the closure of its naval base. The matter may now be passed to the Department of Environment for arbitration.