Seven sites close to the Iron Age monument had been put forward in Shropshire Council’s local plan review to be considered for development.
But the council's planners have decided not to progress with any of the sites.
Andy Wigley, Shropshire Council’s historic environment manager, said none of the sites were acceptable, adding: “This new plan will go through until 2036 and we are looking to allocate additional sites to allow for future housing growth and employment.
“There was a call for sites and any piece of land can be thrown into the pot. Our job is to assess the sites.
"We took a view of what sites we had and are not proposing to allocate any sites near the hillfort.”
Planning bosses have instead put forward a small site to the west of Oswestry and a larger area in Park Hall to be developed over the next two decades.
The potential development of the area around the hillfort has been the subject of a long-running campaign by Hands Off Old Oswestry Hillfort.
Last weekend about 150 people held hands around the hillfort in a visual protest against the possibility of houses being built to the east.
The theme of the day was SOS - Save our Setting - and aimed to highlight that the surrounding landscape is as vital as the hillfort itself.
Mr Wigley added: "I grew up in Shropshire and have visited the hillfort many times. I also studied hillforts and now it is my job.
"It is a nationally important monument and the campaigners who are fighting to save the hillfort have a right to go out there and be passionate about it."
Mr Wigley said the news means unless the planning policy changes, it is unlikely the area surrounding the hillfort will be developed for the foreseeable future.
One site, on land the other side of Gobowen Road, was adopted in the last local plan and is earmarked for 120 houses.
Mr Wigley said the initial stages of planning have commenced and an application is due to be submitted.