China's environmental authority has rejected one of the country's most contentious hydroelectric projects in southwestern China's Chongqing due to environmental concerns, Caixin magazine reported on Wednesday.

China Three Gorges Corp and other companies should not "redesign or construct" the Xiaonanhai hydroelectric station, the magazine quoted a written document issued by the Ministry of Environmental Protection as saying.

Development of the Yangtze River should protect rare and endangered fish species and attach great importance to ecological conservation in the area, according to the document.

Chinese environmental groups have long called for an end to the Xiaonanhai Dam as it would greatly damage fish species and environment.

The project, with a total investment of about $3.2 billion yuan, was suspended in 2009 under pressure from environmental critics. A launch ceremony was held in March 2012, but it was then suspended again.

Three Gorges, the State-owned company that operates the world's biggest hydropower project, was the developer and builder of the Xiaonanhai Dam.

Zhang Boting, deputy general secretary of the China Society for Hydropower Engineering, confirmed the project failed to pass the environmental impact assessment, however, he said the dam is still likely to be built in the future.

"The project was approved by the State Council, so cancellation of the project still needs approval from the State Council," said Zhang.