In a move that has enraged one of the city's most powerful developers, Planning Minister Richard Wynne has rejected a $1 billion Collins Street tower that would have overshadowed the Yarra River.

Mr Wynne's rejection marks the second time developer CBUS Property has had its plans for the former National Mutual site at 447 Collins Street knocked back.

CBUS Property’s plan for 447 Collins Street – twin towers connected by a skybridge - has been rejected by the planning minister.

Lord mayor Robert Doyle said Mr Wynne's decision was a terrible result for the city, and the project had now become "a planning political pawn".

Former planning minister Matthew Guy rejected an earlier tower proposal on the site that rose to almost 100 levels.