The controversial plan to build an Apple store at Melbourne's Federation Square is doomed after heritage authorities blocked it because it would "adversely" affect the cultural heritage of the square.

Key points: The Andrews Government and Apple have acknowledged the store can not proceed

The Andrews Government and Apple have acknowledged the store can not proceed Heritage Victoria refused a permit for the store because it would affect the square's cultural heritage

Heritage Victoria refused a permit for the store because it would affect the square's cultural heritage The Victorian Government has announced a review of Federation Square's future

Heritage Victoria on Friday refused the application to demolish the square's Yarra Building to make way for the store.

In a statement responding to the decision, the Victorian Government said the store could no longer go ahead.

"Apple and the Victorian Government have acknowledged that based on Heritage Victoria's decision, the proposed Apple global flagship store cannot proceed," it said.

In a separate statement, Apple said: "While we are disappointed we're no longer able to pursue our plan for Federation Square, we remain committed to serving our customers in Melbourne and across Australia."

In its decision, Heritage Victoria said it had refused the application because it would cause "an unacceptable and irreversible detrimental impact on the cultural heritage significance of Federation Square".

The Andrews Government angered many when it approved a plan for Apple to build a "flagship" store on the site, which is considered a cultural precinct rather than a commercial area.

Part of the inspiration for the store was a desire to boost revenue for the square, which has struggled financially in recent years.

An artist's impression of the planned Apple concept store. ( Supplied: Victorian Government )

Jobs Minister Martin Pakula said a review would now take place to consider the square's future .

"The review will examine how Federation Square looks, how it's funded and how it operates so that it continues to stand out as an iconic Melbourne attraction that is enjoyed by not only Melburnians but people from all over the world," he said.

"Since its opening in 2002, Federation Square has hosted creative events and world-leading attractions.

"The review will ensure this much-loved space can thrive as a civic, cultural and commercial hub for years to come."

Federation Square is a popular gathering spot for Melburnians. ( Matt Smith )

'Cringe-worthy climb-down': Opposition

The Victorian Opposition's spokesman for planning and heritage, Tim Smith, said the outcome was a "disastrous deal" that damaged Victoria's reputation as a place to do business.

"After years of negotiations, often in secret with one of the world's biggest companies and iconic brands, Apple, Daniel Andrews has been forced into a cringe-worthy climb-down because his ministers responsible have not done their due diligence in regards to the design and heritage impacts of demolishing the Yarra building," he said.

A spokesperson for Federation Square said it looked forward to discussing the future of the square with the Victorian Government and its review panel.

"Whilst we believe our proposal represented a positive step in a pathway to a sustainable future for Federation Square, the Apple project was certainly not the only consideration in planning for the future of this iconic precinct," the spokesperson said.

"There a number of interesting projects in the pipeline that we are confident will excite Victorians in the near future.

The National Trust Victoria nominated the square for heritage protection and on Friday its chief executive officer Simon Ambrose applauded Heritage Victoria's decision.

"We do not oppose commercial activation and development at Federation Square which respects its cultural and architectural significance, however the proposal fell far short of meeting these aims,'' Mr Ambrose said.

"We are proud that our actions will ensure that Federation Square is protected for future generations."

Community action group Citizens for Melbourne said it was "wonderful news for Fed Square and a win for the community".

Spokesperson Tania Davidge said the Apple proposal would have undermined Federation Square's character and civil and cultural purpose.

"Public spaces of the significance of Fed Square do not come along everyday. It's important to fight for what we value," she said.

"Melbourne without a town square is Melbourne without a civic heart".