Plans for a £5m further education college to be built on a playing field behind Bridgemary School, in Wych Lane, were turned down by planners.
Although councillors approved of the educational benefits, they disputed the use of such a large section of the field.
They were also concerned about lack of car parking with just 18 spaces for up to 170 students, 10 full-time teaching staff and five part-time staff.
The college would offer 16 to 18-year-old students courses in car mechanics, catering, IT, woodwork, welding and construction.
Speaking at the meeting in Gosport Town Hall, Jonathan Cox, director of finance and corporate services at Portsmouth's Highbury College, which would run the new complex, said: 'There is very low post-16 participation and a very high incidence of dropping-out among the students who do progress.
'We want to bring education into the community, providing a facility to attract young people who are unlikely to travel outside their local area.
'It's important the facility is seen as a separate entity to the school – we want to move away from further education which is seen as an extension to the school.'
Councillors objected to the plans, saying they would impact on the open space andcharacter of the area, as well as there being insufficient car parking and poor access.
Tory Councillor Chris Carter said: 'Traffic is really an issue – mechanics students are most likely to turn up in cars.'
Councillor June Cully said she supported the development in principle but would like to see the site rotated to provide access to the new college from Wych Lane.
'That would make it far more safe,' she said.
Highbury College spokeswoman Shena Mitchell branded the decision 'shortsighted' and said the college was still considering whether to re-submit amended plans.
She added: 'What we are doing is about giving people hope for the future. It's really sad. The travel plan was already approved by Hampshire County Council.'