Councillor Peter Nutting met with West Midlands mayor Andy Street yesterday and said it was agreed there is no longer support for the scheme, and development will instead be focused in other areas of the county.
Pressure had been put on the Conservative-led authority to build 3,000 homes on behalf of the Association of Black Country Authorities (ABCA), which claims it does not have the land to accommodate an estimated shortfall of about 26,920 houses over the next 18 years.
The latest development comes just days after Shropshire Council confirmed discussions were ongoing, having received evidence from ABCA that the development was justified.
The proposal from the Bradford Estates is to build 3,000 homes and a 50-hectare employment site on greenbelt land off junction three of the M54.
But Councillor Nutting said after a "cordial discussion" with Mr Street, his administration would shelve the project when it meets next month.
He said housing needs will instead be met in other areas of the county, with a large focus around the site of the former cooling towers in Ironbridge.
Power station owner Harworth has earmarked land to build 1,000 homes, a retail and commercial centre and a primary school.
The scheme in Tong, which was first put forward at the beginning of 2019, has been met with fierce opposition from residents and campaign groups, as well as Wrekin MP Mark Pritchard.
Members of Shifnal Matters have cautiously welcomed the news that the plans could be shelved.
The group said on Twitter: "Seems like good news but Shifnal Matters will fight this until we have assurance that it is definitely off the table.
"This development is not needed and not wanted by local Shropshire residents.
"It would have a huge impact on the local environment and services."
Shropshire Council's ruling cabinet is set to ratify the decision at its meeting on February 12.