The Xiaonanhai dam was due to be built in the upper reaches of the Yangtze, west of Chongqing, the South China Morning Post said.
In a document issued on March 30, the ministry barred construction of any dam or sluice gate in the Yangtze river or its tributaries between Xiangjiaba dam on the Sichuan and Yunnan border and the Three Gorges dam, the South China Morning Post said.
The document was sent to the China Three Gorges company, which is the developer of the project, and also to other government departments including the National Development and Reform Commission, National Energy Administration and local environmental authorities. It specifically named the Xiaonanhai hydroelectric power station plans plus two others, the paper said.
The ministry called for an "ecological red line", and said that hydroelectric projects had already damaged rare fish reserves on the upper reaches of the Yangtze river, the South China Morning Post said.
The announcement has been welcomed for Chinese environmentalists.
"We environmental NGOs have worked on this for six years. We really welcome the news," said Zhang Boju of Friends of Nature, according to the Financial Times. "But we are still worried. It is hard to say whether this is a one-off victory or a symbol of things to come."
Zhang had led the campaign against the dam. He told the Financial Times that roads and preliminary structures have already been built – something that is often done to put pressure on regulators to approve projects.
The announcement from the Ministry of Environmental Protection came in a letter approving another project, the Wudongde dam, which is even further upstream than Xiaonanhai would have been. Construction of the Wudongde dam began last year, the Financial Times said.
That letter acknowledged the damage that Wudongde would do, saying that it would change conditions downstream, blocking the migration of fish and increasing the danger of extinction of rare fish, the Financial Times said.
The Xiaonanhai plant, 700km upstream of the Three Gorges dam, and 40km upstream of Chongqing, would have generated 1,680 megawatts of electricity, the South China Morning Post said.
The dam was a favourite project of Bo Xilai, the former Chongqing party chief, the newspaper said. Xilai was jailed for life for corruption in 2013.
