The Welsh Government will not build the £1.6bn M4 relief road, First Minister Mark Drakeford has decided.
He axed the scheme because of its cost and impact on the environment.
The plans would have seen a 14-mile motorway built as a gateway into south Wales in a bid to tackle the congestion faced by motorists around Newport.
Welsh Secretary Alun Cairns said it was a "dark day" but Friends of the Earth welcomed the decision, saying it was "great news for Wales and the planet".
Mr Drakeford's move to scrap the six-lane scheme follows a public inquiry overseen by planning inspector Bill Wadrup, who said the case for the road had been "compelling".
Ministers had decided that, with austerity and Brexit in the background, the uncertainty of the financial position of the Welsh Government meant the project was too expensive.
But Mark Drakeford said he would not have gone ahead even if it was affordable because of the impact on the Gwent Levels.
Mr Cairns said: "It appears that the first minister thinks he knows better than the independent inquiry."
A commission will now look at alternative solutions to the problem of congestion on the M4 in Newport.
Estimated costs stand at £1.6bn, a Welsh Government spokesman said - up on the £1.4bn previously quoted.
Mr Drakeford's predecessor Carwyn Jones said he had seen estimates of up to £2bn.
It is the third time Welsh ministers have shelved plans for the M4 relief road. It had been supported by Carwyn Jones and breaks a Welsh Labour manifesto pledge from 2016.
Newport West Labour AM Jayne Bryant said "the decision condemns Newport to further decades of heavy congestion, idling traffic and toxic fumes".
At least £44m was spent by the Welsh Government on a public inquiry and other development costs.
The decision - point-by-point
- In a decision made in April and revealed on Tuesday cabinet ministers ruled they would not fund the scheme due to "the financial position of the Welsh Government" and "the cost of the project"
- Mark Drakeford said the Welsh Government's financial future is "at a point of maximum uncertainty"
- But the first minister said he also attached more weight than the inspector did to the effect on the environment
- Mr Drakeford said the project would have an "adverse impact" on the Gwent Levels's wildlife, its sites of special scientific interest and its historic landscape
- In his judgement the environmental concerns "outweigh" the road's advantages
Planning inspector Mr Wadrup, who has died since the end of the inquiry last year, had concluded there was a "compelling case for the scheme to be implemented in order [to] relieve an acute problem on the strategic motorway network".
"It is accordingly my view that the scheme is in the public interest," he said. "The scheme would not, to my mind, have any disproportionate adverse impacts."
'No easy answers'
Mark Drakeford told BBC Wales that "even if the M4 relief road had been affordable, I still concluded that I would not have proceeded".
This was because he "took a different view to the inspector on the impact of the relief road of environmental considerations around Gwent", he said.
Asked by BBC Wales if he was comfortable with breaking a manifesto pledge, he added: "I'm comfortable that the circumstances that the promise was made in have altered."
In a statement to AMs, Mr Drakeford said there were "no easy answers" to the issue of congestion on the M4.
He said he would set up a new "expert commission" to look at alternative solutions to solving traffic problems on the M4 around Newport.
It will be guided by ministers' hopes for a "high-quality" integrated and low-carbon transport system, and have "first call on the money that otherwise would have been set aside for the M4 relief road", he said.
The Welsh Government will also implement "a series of fast-tracked" measures "to alleviate congestion on the M4 in south Wales", including enhanced traffic officer patrols and live journey time information.
Newport Council leader, Labour's Debbie Wilcox, said the authority was "disappointed" with the outcome, but recognised "this decision was always going to be a delicate balance".
There was concern from business lobby group CBI Wales. Its director Ian Price said: "No problem has been solved today."
"Congestion and road pollution around Newport can only increase. Economic growth will be stifled, confidence in the region will weaken and the cost of an eventual relief road will rise," he added.
But Friends of the Earth Cymru director Haf Elgar said: "This is a great news for Wales and the planet.
"As well as costing Welsh taxpayers over £2bn, this devastating road would have ploughed through the unique, wildlife-rich Gwent Levels, pumped more climate-wrecking emissions into our atmosphere, and ultimately caused even more congestion and air pollution."
The main proposal for a six-lane motorway south of Newport had been known as the black route - an alternative called the blue route was proposed by its opponents, which would have meant an upgrade of the A48 in Newport, with new flyovers to improve the flow of traffic. Backers have said it would be cheaper.
Small business group FSB Wales said it understood the decision would cause "real dismay" within the business community, but it had long-expressed concern about the black route.
"Welsh Government must move immediately to engage with business to give an assurance that it has some sort of plan B option and/or re-visit the blue route," a spokesman said.
Carwyn Jones had intended to take the decision on the M4 relief road last year, but after delays the decision fell to Mr Drakeford.
He said he had also been concerned about how affordable the scheme was. "We were looking at something between £1.5bn-£1.6bn to £2bn," he said.
"To hear Mark say today it would have eaten into the roads budget would have been very difficult indeed. It would have meant projects would have had to be cancelled."
Costs had risen because of the UK's government intention to charge 20% VAT, as well as other factors such as inflation, Mr Jones said.
The commuter's view
Karis Jones is an associate solicitor who commutes to Cardiff and Newport from Monmouth every day.
She said the rejection of the M4 relief road was "disappointing" and "frustrating".
"I would even have to consider potentially either moving to Cardiff, or potentially looking to move the other side, Bristol way, actually moving outside of Wales," she said.
But, there was relief for Paul and Mandy Jones, who own Tonew Kennels in Redwick, south east of Newport, which is home to up to 100 dogs, including strays and abandoned pets.
The business lies almost directly in the path of what would have been the relief road route, and the couple were worried they would be forced out by a compulsory purchase order.
Mr Jones said: "We won't have to move anywhere. We can carry on with life as it is."
Opposition AMs were scathing. Russell George, Welsh Conservative AM, said the announcement was a "kick in the teeth for Welsh commuters".
Plaid Cymru which had long opposed the scheme, said it showed the party was "right all along" but leader Adam Price accused the Welsh Government of "eight years of dithering".
"His decision means fewer growing businesses, fewer jobs, lower wages and less prosperity," Brexit Party group leader Mark Reckless added.
There had been significant opposition among Labour AMs to the project. Pontypridd's Mick Antoniw welcomed the move and said the "financial and environmental consequences make the proposal completely unsustainable".
What was the M4 relief road project?
- Originally proposed in 1991 as a solution to congestion at the Brynglas Tunnels
- Road would have been six-lanes wide and stretched from Castleton, west of Newport, to Magor east of the city
- Scheme would have replaced the Newport stretch of M4, with the existing road downgraded
- Plans were brought back on the table after UK government offered Cardiff ministers borrowing powers in 2013
'An expensive U-turn'
By Felicity Evans, BBC Wales political editor
The letter explaining the reasons for Mark Drakeford's decision rejects the £1.4bn proposals on grounds of cost.
Mr Drakeford notes that the allocation of Welsh Government funds is beyond the scope of the public inquiry - which begs the question: why did the Welsh Government commission a public inquiry that cost tens of millions of pounds, when the cabinet made the decision based on factors the inquiry could never consider?
The answer to that is the change of leadership at the top of the Welsh Labour.
Mark Drakeford was always cooler on the M4 relief road proposals than his predecessor, Carwyn Jones.
Nevertheless today's decision marks an expensive U-turn on his party's 2016 manifesto commitment.
For emphasis Mr Drakeford goes on to say that even if cost had not been an issue, he wouldn't have gone ahead because of the environmental impact.
The Future Generations Commissioner Sophie Howe had been a prominent opponent of the project. She said it was a brave decision and the "right one for people and planet".
"Hope this marks a shift in policy for Wales and the Welsh Government now quickly bring forward investment in public transport," she added.
The Welsh Government declared a "climate emergency" in April. James Byrne, Living Landscapes Manager for Wildlife Trusts Wales said: "We're delighted."
"This is exactly the sort of leadership we need in a world where we've declared a climate emergency," he said.
'A huge win for environmentalists'
By Steffan Messenger, BBC Wales environment correspondent
Today's announcement by the first minister is a huge win for environmentalists and others who have long campaigned to protect the Gwent Levels.
It is striking that Mark Drakeford says he attaches "very significant weight" to the environmental concerns and would have rejected the plans even if the costs of building the new motorway were lower.
It may not be the most famous of Wales' beauty spots, but the wetlands south of Newport have been compared by campaigners to the Amazon rainforest in terms of biodiversity.
Rare birds, plants and insects have found a home here - especially in the unique drainage ditches known as reens - dug during Roman times.
The first minister said the "substantial adverse impact" the plans would have had on nature could not be justified, contrary - we now know - to the conclusions of the public inquiry.
It may be a coincidence - but his decision also comes during Wales Nature Week and a day before the Welsh Government is set to mark World Environment Day at the Senedd.