Developers Drum had appealed the council's initial refusal of planning permission for its demolition.
Save Leith Walk campaigners have scored a major victory in their battle to stop the demolition of the parade of shops on the street.
Drum Property Group had appealed the decision by Edinburgh City Council to refuse permission for the demolition and the subsequent development of the building.
Plans had been submitted for the construction of a hotel, a student accommodation block and flats but were refused by the council in February this year.
However, this morning, both appeals were dismissed by the Scottish Government, securing a victory for campaigners who celebrated after overcoming what they said seemed an "insurmountable" challenge.
Drum Property Group said they were "obviously disappointed" by the decision and will consider their position in January.
'No acceptable redevelopment proposal that might justify demolition'
In the decision notice, reporter Karen Black from the Planning and Environmental Appeals Division of the Scottish Government said she agreed with heritage and community groups that the building reinforced the character of Leith Walk.
She added the building makes a "positive contribution" to the character and appearance of the area.
Dismissing both appeals outright, Ms Black said: "I concluded that planning permission should be refused as the replacement buildings would not preserve or enhance the character and appearance of the conservation area, in contravention of the relevant statutory tests and development plan policies.
"It follows that there is currently no acceptable redevelopment proposal that might justify demolition."
Challenge was 'insurmountable'
Reacting to the decision, the Save Leith Walk campaign said the proposals were "completely out of step with community needs" and welcomed the decision.
It said: "Today's decision shows what can be done when a community organises and unites behind a common message.
"It shows the developers plans for Stead's Place were completely out of step with community needs for housing, local businesses and retaining our heritage."
"The Scottish Government now stands alongside the City of Edinburgh Council, the University of Edinburgh and our elected representatives who support our community in rejecting the developer’s plans for Stead’s Place.
"It is easy to give up hope when you are faced with a challenge that looks insurmountable, but when community groups get the right combination of people together, they can be heard at the highest level. We hope that our campaign gives strength and hope to people across Scotland facing unwanted developments in their areas.
"The people of Leith have a clear vision for Stead's Place and they are committed to making that vision become a reality. Should the developer now decide that this project is not for them, then the we are ready to take it forward ourselves."
'Today Leith has been heard'
Ben Macpherson, the Scottish National Party MSP for Edinburgh North and Leith said he was "delighted" by the decision and added he was proud of the work done by the campaign to stop the demolition.
He said: “Today Leith has been heard! Having been part of the ‘Save Leith Walk’ campaign since the very first meeting, the hard work and determination shown by local campaigners and the community has been incredibly inspiring.
"Working alongside ‘Save Leith Walk’, the community council and SNP colleagues Deidre Brock MP, councillors Adam McVey, Amy Mcneese-Mechan and Rob Munn, I’m very proud that together we’ve achieved this positive result for the community and preserving Leith’s heritage.
“It’s very disappointing that Drum evicted several good businesses over the last year. However, now we can look forward to what’s next for Stead’s Place and I urge Drum to respond to the community’s aspirations in that process and support the Leith Depot’s future on the site.
"I’ll be doing all I can to positively influence decisions toward affordable housing and affordable business space, while preserving the current building."
'Delighted' decision has been upheld
The council's planning convener, Neil Gardiner said it was great news for the community.
He said: "I’m delighted that our decision has been upheld and that the reporter saw no good reason for this much loved 1930s building to be demolished.
"This is great news for the local community and a really good example of when we are considering a significant application like this local people can be heard, listened to and ultimately influence development in the city.
"We had a full day hearing for this application where the developer and community representatives were able to present to committee and answer questions.
“I do appreciate this will be disappointing for the developer.
“This is an important site for the city and I look forward to work with the community and developer on future plans being brought to the council including a suitable mix of uses to breathe new life into this building and the neighbourhood.”
A spokesperson for Drum Property Group said: “We are obviously disappointed by the decision by the Scottish Government reporter.
We shall now review the reporter’s detailed findings before considering our position in the New Year.”