Brighton and Hove City Council had earlier granted Po Na Na a provisional public entertainment licence until 3am. However, magistrates turned down the application after hearing residents' concerns about disturbances in the streets.
A new hearing is expected in the new year, which could yet see the opening of one of the south coast's largest clubs.
Brighton police told magistrates that they would be unable to cope with another 1,000 clubbers spilling on to the streets at 2am and would be happier if the club was to close at 1am.
Residents around St James's Street, the proposed site of the club, complained that the increase in venues being granted late licences was to blame for an increase of crime in the area over the last five years.
Derek Peacock, the chairman of the St James's Street Action Group safety committee, said: "There's a definite correlation between the number of drinkers and the number of violent attacks and general disturbances."
In a trading statement earlier this week, Po Na Na said that its newly opened Po Na Na in Brighton, near to the proposed club site, was profitable within five weeks of opening, "demonstrating the strength of the brand".
The company also announced that it had renegotiated its banking facilities to give it £2m for the acquisition and development of new sites.