The conservation commission in the town of Edgartown on the island of Martha's Vineyard has unexpectedly voted against the construction of two undersea cables that would connect the 84-turbine project to mainland Massachusetts.
Vineyard Wind's first denial in a long and complex approval process came after a meeting at which local fishermen testified against the project.
The developer will appeal the denial to the Massachusetts Department of Environmental Protection (DEP).
"We are disappointed in the commission's decision, which was flawed, inconsistent with the evidence before it, and in contrast to the conclusions of many other regulatory authorities.
"Vineyard Wind unfortunately has no choiceb but to request a superseding order from the Massachusetts Department of Environmental Protection," said Erich Stephens, chief development officer for Vineyard Wind.
Meanwhile, the US government's Bureau of Ocean Energy Management has announced that it is not yet ready to issue a final environmental impact statement for the project.
"We understand that, as the first commercial scale offshore wind project in the US, the Vineyard Wind project will undergo extraordinary review before receiving approvals," Vineyard Wind said in a statement.
"As with any project of this scale and complexity, changes to the schedule are anticipated," it said.
Elsewhere, Dutch offshore contractor Heerema has been contracted by Vineyard Wind to install the project's monopile foundations.
Vineyard Wind is being developed by a joint venture between Copenhagen Infrastructure Partners and Avangrid.
It will consist of 84 MHI Vestas V164-9.5MW turbines with the 400MW first phase expected online in 2021.