The complex was slated for sacred ground near the Colorado River.
The controversial proposal would have cost the Native American tribe $65 million in order to bring an estimated additional 5 million visitors to the area, NBC News reported.
The proposed Grand Canyon Escalade Project was set to include hotels, an IMAX theater, and other attractions.
Legislators voted down the bill 16-2, citing safety concerns as well as the sanctity of the land where the project had been proposed, located at the confluence of the Colorado River and the Little Colorado River.
"It has been attractive to developers, but our people and our medicine people have always had stories about the emergence of our people from that area," Navajo Nation President Russell Begaye told NBC News.
Environmentalists and activists, including Robert Redford, had advocated to halt the project, and an online petition garnered thousands of signatures, Associated Press reported.
“We needed to be a presence there to let them know we’re not going to go away. We’re going to always be here to defend our Mother, to defend our sacred sites," activist Renae Yellowhorse told AP.
Defenders of the project had noted that it would bring much-needed jobs to an area that is plagued by high unemployment and relies heavily on mining for jobs and revenue. Developers told AP that the tribe would have received 8 percent of gross revenue from the project.
Council Delegate Seth Damon said he supported some development in the region, but not if it meant the Navajo people would be "ripped off," Grand Canyon News reported. The Navajo Nation is currently seeking other ways to stimulate jobs, including a potential manufacturing project, according to the same NBC report.