Construction crews on the upcoming Thirty Meter Telescope (TMT) in Hawaii are removing equipment from the site after the state Supreme Court revoked its permit.
The cessation of activity follows protests from Native Hawaiians and environmentalists who oppose the project, saying it would damage sacred lands.
The groups have repeatedly tried to block construction of the TMT at the site this year.
In November, the Court handed the developers a temporary suspension of their permit until 2 December 2015 in the hope that the issue would have been resolved by that date.
However, without any solution reached, the Court ruled that the project, which was issued by state officials in 2013, was invalid because at that time a public hearing to air objections to the plan had not been held.
The move means the construction of the TMT potentially faces a significant delay if the team decides to apply for a new permit to build at the Mauna Kea volcano on Hawaii's Big Island.
"We respect the Hawaii Supreme Court decision and, as good neighbours and stewards of the mountain, TMT has begun relocating construction vehicles and equipment from Maunakea," Henry Yang, chair of the TMT International Observatory board of governors, said in a statement.
Officials with TMT are assessing which steps they will take following the court ruling, said Scott Ishikawa, a spokesman for the project.
Astronomers consider the volcano one of the world's best places to view the cosmos. Project officials have said the TMT would have a primary mirror spanning 30 metres and rank as the most powerful optical telescope on the planet.
Partners in the $1.4bn project include scientists from Japan, Canada, India, China and the California Institute of Technology.
In November, construction began on The Giant Magellan Telescope situated on a wind-buffeted, 2,500-metre mountaintop in Chile.