Tony Martin has lost his appeal for a restaurant in the old electricity showroom in Princess Street.
The government's planning inspector ruled another restaurant would be one too many in the town centre.
He said the small number of empty shops in Knutsford proved there was a demand for shopping space.
But he accepted that there was no evidence that a restaurant would be a nuisance to residents in Silk Mill Street or foil any future residential and retail development on the site of Knutsford's outdoor market.
Clr Tony Mazzeo, chairman of the planning committee, welcomed the inspector's decision.
"It's good news that the inspector has agreed with us," he said.
"We have been trying to get a balance in the town and we have got a good balance now.
"More restaurants would upset the balance and make retail retailing unviable."
Mr Martin was unavailable for comment yesterday (Tuesday).
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