The $2.5 billion project was unanimously rejected by left-wing President Gabriel Boric's cabinet.
"We are confident that a robust, traceable, evidence-based (decision) has been adopted here," said Maisa Rojas, the environment minister.
The project aimed at extracting millions of tons of iron ore and thousands of tons of copper in an impoverished area of northern Chile around 450 kilometers (280 miles) from Santiago, the capital.