Permission for an 18km ring road in Galway is to be cancelled.
An Bord Pleanála has indicated that it will not oppose an order to set aside the permission, following applications for a judicial review of its decision.
The project had been given the green light last November.
But it has emerged that the planning board did not take the State's Climate Action Plan into account when considering the application for the development.
In correspondence with one of the parties that had sought to overturn the decision, legal representatives for the board said it was not aware that the climate plan had been adopted four days before it granted permission.
In light of this, the board will not oppose an Order of Certiorari when the matter comes before the High Court next week.
This means that the court can cancel the original decision with the board then having to re-examine the case and issue a new ruling in due course.
It is understood that legal proceedings will be adjourned on Monday for a three-week period to allow the parties involved to liaise in relation to the form of orders.
The approval of the road plan followed a protracted oral hearing and five meetings of the board to consider the application.
When the final decision was made, on 8 November, An Bord Pleanála said the adoption of the climate plan had not been communicated to it.
The plan sets out the manner in which a 51% cut in carbon emissions can be achieved by 2030.
In this regard, it identifies "a modal shift to transport modes with lower energy consumption", such as increased public and active travel.
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Minister Eamon Ryan, Minister of Transport, said: "We will engage with the TII and Galway City and County Councils following the decision by An Bord Pleanala regarding the N6 GCRR today.
"We have to integrate the Climate Action Plan and Ireland's climate obligations into transport plans. We will listen to An Bord Pleanala and assess next steps."
Today's developments are the latest twist in a long running effort to ease the Galway’s chronic traffic problems.
Plans for the N6 Galway City Ring Road were lodged in 2018 after an earlier attempt to build an outer bypass of the city was refused on environmental grounds.
Supporters of the planned 18km route say it is essential to deal with widespread gridlock in the city.
They argue that the future development of the city is largely contingent on traffic alleviation measures being carried out.
But opponents contend that the construction of a dual- and single-carriageway route, from Bearna to the existing M6 motorway, would only increase emissions.
Instead, many favour enhanced investment in sustainable transport options and an increased focus on potential public transport solutions.
The road would have involved the construction of a number of tunnels and a new crossing of the Corrib.
Today’s news has been welcomed by Green Party Senator Pauline O’Reilly.
She said it should lead to a "reimagined Galway", with a much greater emphasis on public and active travel to ease the city’s gridlock.
In a joint statement, Galway City and County Councils said they were disappointed with the development.
But the local authorities maintain that the issues that have arisen can be resolved and said they intend to continue to try and progress the project.
Taoiseach Micheál Martin has said it was his understanding that there will be a judicial review of today's decision by An Bord Pleanála in early November and that the council is confident of getting the project back on track.
"It is an issue that one has to reflect on in terms of the length of time it is taking to progress a project of this kind," Mr Martin said.
"I know there is divided opinion but many people see this development as essential to the growth of Galway."
Fine Gael Senator Seán Kyne said the decision was hugely disappointing and a major setback for Galway.
"It condemns the people of Galway to further endless delays and congestion and very difficult to stomach," Mr Kyne said.
Additional reporting: Teresa Mannion
