The long-term future of Sydney's historic Luna Park is again in doubt after a court ruled the fun park did not have the right to install a new ride called the "Flying Carousel" without seeking development approval.

The Land and Environment Court judgment means Luna Park must instead submit to a development application process every time it moves or replaces rides, managing director Peter Hearne said.

Local residents concerned about noise would most likely be able to have their objections considered as part of any application.

Luna Park's owners are fuming over the decision. Credit:Tamara Dean

"We are deeply disappointed by this decision, which places a big question mark over the long-term viability of one of Sydney's best-known and most-loved destinations," Mr Hearne said. "This is a terrible outcome not just for Luna Park but for Sydney."