The Court of Appeal has set aside the Bay of Plenty Regional Council's decision to move its headquarters from Whakatane to Tauranga.
The move was announced by the council in 2006 and could have resulted in the loss of 100 jobs but was put on hold after the Whakatane District Council unsuccessfully sought a judicial review of the decision.
On Tuesday, the Court of Appeal ruled that the Local Government Act required greater consideration of community views and preferences than occurred when the decision was made to shift the regional council headquarters.
Whakatane mayor Colin Holmes is pleased with the decision, which he says is a major one for local government.
Mr Holmes says he hopes the regional council will be a lot more objective and impartial when it reconsiders the matter.
The regional council, known as Environment BOP, says it is disappointed by the court's decision.
Regional council chair John Cronin says the court has not questioned the council's decision, only the process followed in reaching it and legal advice is being taken about what to do next.
Mr Cronin says the section of the Local Government Act focused on by the Court of Appeal is being repealed by central government.