Star Casino says it will push on with plans to build a $530 million tower on Sydney's waterfront despite it having been rejected by planning authorities.

Key points: Plans for the 220-room Ritz-Carlton hotel and 204 residential apartments were lodged by Star in August

Plans for the 220-room Ritz-Carlton hotel and 204 residential apartments were lodged by Star in August After a review and public submissions, the independent NSW Planning Department rejected it

After a review and public submissions, the independent NSW Planning Department rejected it Star intends to push on planning for the project, with a final decision set for next month

In a decision that has pitted the anti-development groups against tourism proponents, Star's concept, labelled "completely inappropriate" by one City of Sydney councillor, was rejected by the NSW Planning Department as inconsistent with the existing and future character of inner-city Pyrmont.

It is understood Star City is privately fuming over the department's decision, which puts its luxury 220-room Ritz-Carlton hotel and 204 residential apartments on hold, possibly for good.

The 66-storey building is on the other side of the Sydney Harbour from Crown's half-complete Barangaroo skyscraper, and was pitched as part of Star's plan to attract wealthy Chinese tourists.

Analysts suggest the development was also a critical part of Star's future plans to lure tourists away from Crown's controversial luxury casino and hotel, due to be complete in 2021.

It is understood Star still hopes the development will get over the line — despite the independent NSW Planning Panel, which has the final decision, usually taking Department advice.

In a statement, a Star spokesperson said it would "continue to seek approval".

"We believe it will have a significant benefit for tourism, the city and for the state of NSW," the spokesperson said.

Crown Casino's Barangaroo development, pictured in April, is set to be finished in 2021. ( AAP: Jeremy Piper )

In its report released on Thursday night, the department said the proposal would have adverse impacts on views from residential properties and cause overshadowing in winter.

"The plan would introduce a new tower form that is inconsistent with its immediate context and would result in unacceptable visual impacts due to its scale, isolation and visual dominance of the existing Pyrmont character," the report said.

"[It] fails to promote good design and amenity of the built environment."

Rejection sparks fierce debate

The decision has split sectors of Sydney.

Planning Minister Rob Stokes backed his department's recommendation, while the Treasurer, Dominic Perrotet said he did not understand why there was not better coordination between the department and the developer.

"You would think common sense would prevail and you'd get a development that works and at the same time delivers a world class hotel that backs in tourism opportunities for our city and state," Mr Perrotet said

Margy Osmond, chief executive of the Tourism and Transport Forum, said the decision sent a "most unfortunate" message.

"At a time when we need more and more A-grade accommodation and some other styles that we're not making these and we're getting a reputation for being an incredibly difficult place to develop anything," she said.

An artists impression of The Star's $530 million tower, which is now unlikely to proceed. ( Supplied: Star )

But Independent City of Sydney councillor Philip Thalis said Star Casino's suggestion that the tower "fitted in" with the area was laughable.

"It's basically a rocket that's just landed in Pyrmont," he said.

"It's completely inappropriate, the City [of Sydney Council has] said as much, and if you want proof or how destructive these sorts of buildings are you just have to look straight across the water at Crown."

In submissions to the Planning Department, some local residents were supportive of the proposal, predicting it would help raise property prices in the area.

While others labelled it an "eyesore" and "extreme over-development".

It is understood the Independent Planning Commission will reconvene to review the decision late next month.