Developer Senescura Ltd had applied for up to 182 units of care accommodation and a 75-bed nursing home and dementia unit at the Hencote estate off Ellesmere Road.
They had claimed that there was an immediate need for 1,000 extra care and 400 care home beds in Shropshire, a need which is not being met by current provision or new development proposals.
But Shropshire Council planners, who took a delegated decision last month, denied that.
The council's Social Care department told planners that the development could de-stabilise the care market, which is under severe pressure.
Planning official Tracy Darke, the council's assistant director of economy and place, in her decision report, said that within a 15-mile radius of the proposed site, three care homes have closed since 2020 and another 15 care homes are already operational within the 15 miles vicinity.
She said: "We believe the care home market in Shropshire is under significant pressure and with national changes on charging being bought in we have concerns over the viability of any new development or the potential impact it may have on other parts of the social care market."
The planned facility could also struggle to recruit workers, she said.
Planners also said that the land is not allocated for development and is classified as being in the countryside in the council's development plan.
Older people at the site would also have an over-reliance on "less sustainable forms of transport" and the applicant had failed to say how it would deal with this, they added.
Planning officials said the development would boost the economy, the supply of homes, and would present a "biodiversity net gain". But these were not enough to outweigh their other concerns.
The plan had received 176 objections from the public, and one letter in support.
It is open to the developers to appeal the decision with the Planning Inspectorate.