The plans, including 39 new grass courts, including an 8,000-seater showcourt on the adjacent Wimbledon Park, had been given the green light by the London Borough of Merton, but Wandsworth's planning committee have turned it down.
However, the decision will now be reviewed by the Mayor of London’s office.
"Naturally, we are disappointed by the London Borough of Wandsworth's decision," Sally Bolton, Chief Executive of the All England Club, said in a statement.
"Our proposals will deliver one of the greatest sporting transformations for London since 2012, alongside substantial benefits for the local community."
Only a small section of the AELTC's plans come under Wandsworth but both councils needed to give the green light for the ambitious plans to move forward.
Wandsworth's planning officers earlier this month recommended councillors opposed the development, arguing it would "cause substantial harm to the openness of metropolitan open land".
A post from the London Borough of Wandsworth on X, formerly Twitter, confirmed the decision: "Wandsworth's planning committee votes to refuse Wimbledon tennis expansion plans."
There had also been opposition from local residents and environmental groups with 14,000 people signing a petition to stop the plans which would include the felling of 300 trees, although AELTC say more than 1,000 will be planted.
A sizeable crowd of protesters stood outside Wandsworth Town Hall on Tuesday while councillors made their decision.
The All England Club has transformed its facilities in the past two decades but the fact that the Wimbledon qualifying competition has to take place off site, several kilometres away, has been one of the motivating factors behind an enlargement.
In 2018 the AELTC's 65 million pounds ($81 million) bid for Wimbledon Park Golf Club was accepted by members.
The tennis club argues that its expansion plans would actually return private land back to the public.
"We firmly believe the AELTC Wimbledon Park Project offers significant social, economic and environmental improvements, including turning 23 acres of previously private land into a new public park, alongside hundreds of jobs and tens of millions of pounds in economic benefits for our neighbours in Wandsworth, Merton and across London," Bolton said.
"Given the split council decision, with the London Borough of Merton resolving to approve our application last month, our planning application will now be referred to the Mayor of London's office for consideration."
Lawmaker Stephen Hammond, who represents the Wimbledon constituency, said he was pleased Wandsworth had refused the plans.
"I think this application is too big and very difficult to justify," he was quoted as saying by the Daily Mail. "It is not clear that you need the 39 courts, it is not clear that they need to build the size of show court they are talking about, and it is not clear that they have thought about the building in the public park."
