Proposals had been submitted to Dudley Council chiefs to tear down the derelict Fiddlers Arms, in Straits Road, Lower Gornal.
It would have seen 12 houses built, eight detached and four semi-detached, on the site of the pub.
But the plans have now been withdrawn after the council's historic environment team recommending the move be refused.
A statement said: "The proposal to demolish the Fiddlers Arms and associated outbuilding would result in the total loss of significance of the heritage assets and loss of a positive part of the borough’s townscape.
"The applicant has failed to demonstrate the economic, social and environmental gains of the proposed scheme, particularly in the absence of clear and convincing justification for the loss of the heritage assets and the negative impact this will have on the local character and distinctiveness of the area or justification for the proposed replacement scheme."
A pub has been at the site as far back as the late 1800s. Locals celebrated back in 2017 when a planned Co-op on the site was turned down after it was sold by Marston's to a developer.
Councillor David Stanley, who represents Gornal and is a former Mayor of Dudley, said in his objection to the plans: "I object to the demolition of the Fiddlers Arms.
"I have been contacted by numerous residents about their concerns of the loss of this locally-listed building. There has been a public house on this site for more than 160 years and it has played a large part in the area with the community. I understand the situation with the council regarding development in building new homes but this is not a suitable location."
A planning statement to Dudley Council says the proposal would be a "benefit to the immediate neighbouring properties and the wider street scene as a whole".
And a resident, in support of the plans, added: "The pub has been closed now for two and a half years and the building and grounds are in a terrible condition and a complete eyesore.
"I feel the premises should be demolished and more beneficial use made of the ground. Building new homes on this land can only benefit the community."