By voting 6-3 to oppose the Saturday event, councillors rejected the advice of their own planning department and the Southbank Residents Group.

Lord mayor Robert Doyle, whose team knocked back the permit, predicted that the matter would now go to the Victorian Civil and Administrative Tribunal.

Promoted as a high-end design hub, "The Upmarket" would have run every Saturday from 9am in the forecourt of the Australian Centre for Contemporary Art, on Grant Street.

But what was likely to be a rubber-stamping exercise at an August council meeting was delayed when a line-up of residents from The Melburnian and The Sovereign buildings raised vocal objections - one branding the venture a "flea market".

The penthouse in The Melburnian has previously sold for more than $15 million, with owners at the exclusive address including AFL footballers and wealthy business people, dentists and mathematicians.

"It is fair to say that the residents of The Melburnian are an articulate and well-connected group, and that may have assisted their cause last night," Cr Stephen Mayne said.

On Tuesday night, former Foster's Group executive and resident Graeme Willersdorf told councillors to close their eyes and imagine what it would be like to wake up in one of their apartments after a busy week and a late night at a Melbourne Symphony Orchestra performance.

"It's now 7am on a Saturday morning," he said. "Cars start driving around the area … There's tooting, there's loud voices et cetera."

Another resident predicted that market goers would urinate on the fence of The Sovereign and litter in nearby public spaces.

But, unlike last time, the meeting also heard from a significant number of locals in enthusiastic support of the project.

Another resident of The Sovereign, Paul Doyle, said he had been emailed a form letter sent to The Melburnian residents urging them to lodge an objection to the market. "Residents who supported the project were advised to take no further action," he noted.

The Southbank Residents Group argued that there had long been plans, outlined in numerous blueprints, to make the area a more vibrant place for visitors and locals.

The group's former president Joe Bagnara said "Southbank has no soul", and that the market could help build a community in the growing skyscraper precinct.

"We want to get the people out of their little boxes," Mr Bagnara said.

However such arguments were not enough to sway six councillors who came to the conclusion that the design market would have "detrimental effects on amenity".

The lord mayor accepted that while there was broad community support for the venture, it did not change the fact the market would disrupt its closest residents.

Cr Beverley Pinder-Mortimer said she was concerned about traffic, parking and the safety of children and pets on St Kilda Road on a Saturday morning.

"As deputy chair of arts and culture, I can't see the arts benefit," she said.

Greens councillor Rohan Leppert argued the market had been proven to be an appropriate use of the site and that it was the first time in this term of council that an application supported by both planning officers and the residents group had been knocked back.