Lidl
Torridge District Council's planning committee voted 5-4 to turn down the proposal.
The decision was greeted by applause from members of the public who attended the meeting this morning.
Lidl had applied to build on New Street car park, Torrington Motors and a strip of disused garden to the rear of 176 New Street.
If the application had been granted, the supermarket firm said it would create around 20 full and part time jobs.
Torridge District Council owns the car park and had already agreed to sell the site if permission was granted, in a deal which would see the authority net around £500,000.
As well as the retail store and 68 car parking spaces to service it, the proposal included provisions for a replacement car park and a new bus stop on New Street plus a new crossing point.
The motion to refuse the planning application was made by councillor Margaret Brown, a Torrington councillor who is also the chairman of Torridge District Council.
The decision went against the advice of the council's planning officers, who had recommended approval.
Lidl can appeal against the decision.
For a full report and reaction see Thursday's North Devon Journal .