The retailer wanted to build a branch at the Cheddar Football Club site in Draycott Road.Concerns were raised at public meetings in January about Tesco's proposal and another application submitted by Sainsbury's for a store at Steart Farm.
Sedgemoor District Council turned down Tesco's plan for a food store with parking, landscaping and a petrol station.
The council said the proposals "would have a significant impact on local landscape character including urbanising the green edge of the settlement of Cheddar".
In February, it approved Sainsbury's application to build a superstore on the outskirts of the village - at Steart Farm, Wedmore Road - which is about 2 miles (3km) from the site where Tesco had wanted to build its supermarket.
