Orange Order parade barred from part of Crumlin Road on 12 July
Several nights of rioting took place after the parade was stopped from returning along the road last year, with scores of police officers injured.
The road separates unionist and nationalist communities.
In response, the DUP and Ulster Unionists have pulled out of talks on the flags, parades and the past.
On Wednesday, the commission ruled that the outward leg of the parade could proceed along the road.
However, it said that only hymn music could be played by bands.
In its determination on the return leg, the Parades Commission said: "On the notified return route, the parade shall not process that part of the notified route between the junction of Woodvale Parade and Woodvale Road and the junction of Hesketh Road and Crumlin Road.
"The parade shall disperse no later than 7.30pm."
Loyalists have maintained a continuous presence at a protest camp at the Woodvale/Ardoyne interface at Twaddell Avenue since last July.
A recent application to complete last year's march was turned down by the commission.
Explaining Thursday's decision, the commission said: "The issue of parading along the Crumlin Road has profound implications for communities coming out of conflict and requires resources and structures commensurate to the task.
"It is the commission's view that while there have been efforts to address these issues, they have been piecemeal and under-resourced."
It added: "In reaching its decision, the commission considered compliance with the July 2013 determination, the impact on community life and community relations, and the potential for public disorder.
"The commission determined that these potential impacts would be disproportionate to the significance of this parade processing the entirety of its notified route."'Treated advice with contempt'
In a joint statement, the DUP, UUP, Traditional Unionist Voice (TUV), Progressive Unionist Party (PUP) and Ulster Political Research Group (UPRG) said they would cut contact with the Parades Commission.
"This decision and its surrender to publicly issued republican threats is unacceptable and flies in the face of the democratically expressed wishes of the people of Northern Ireland who want to move forward on a basis where cultural expressions are undertaken with respect and met with tolerance.
"The message the Parades Commission has sent out is simple. It has shown that the commission members place no value on a relationship with unionism and have treated our advice with contempt.
"It has turned its face away from the evidence including from the PSNI. It is regrettable, but so be it.
"As a consequence we, as leaders of the unionist community, see no value in continuing contact with a Parades Commission that does not listen and is immune to reason."
The Orange Order described the Parades Commission decision as "preposterous".
"This preposterous decision by the Parades Commission only underlines the increasing perception that its determinations are dictated by the threat of physical force opposition to our parades," it said.
"Despite the exploits of an ill-informed and apparently ill-disposed Parades Commission, we would appeal for calm and call on all not to be drawn into the trap being set by republicans."'Sensible decision'
SDLP North Belfast assembly member Alban Maginness welcomed the decision.
"This is a sensible decision from the Parades Commission and reflects the relentless willingness of residents in Ardoyne to reach an agreement on this parade with the Orange Order and their neighbours in Twaddell and Woodvale," he said.
"Whilst no agreement could be reached on parades for this Twelfth I hope that open dialogue with all interested parties and groups will continue in the weeks and months ahead so that we can find a local solution that benefits the people who live and work in this area."
Sinn Féin's Martin McGuinness said: "Unionists need to show leadership, respect the determination of the Parades Commission and support the rule of law."
Alliance North Belfast councillor Nuala McAllister urged all sides to respect the Parades Commission decision.