Plans for a Direct Provision centre in Oughterard in Co Galway have been shelved.
The controversial plan will not now go ahead after the applicant withdrew from the tender process.
Locals have been staging a round-the-clock protest outside the former Connemara Gateway Hotel for the last 3 weeks in opposition to the decision to base up to 250 asylum seekers in the premises.
However, the applicant has now withdrawn the tender, claiming there was a lack of support from the Department of Justice.
Those involved in demonstrations in Oughterard have welcomed the decision to abandon plans for a Direct Provision centre, and say the system for accommodating refugees and asylum seekers needs to be reformed.
Speaking at Mass in Oughterard on Sunday, the Bishop of Galway Brendan Kelly also called for an end to the current system of direct provision, which he said "strips people of their independence, their cultural identity and their dignity and has a lasting traumatic impact on residents".
Bishop Kelly said the current system is not fit for purpose, and prevents people from integrating, while he said the State has fallen far short by inadequately preparing local community to effectively plan for the new arrivals.