Justice Secretary Michael Gove rejected a ruling last month by the Parole Board that the notorious gangster was suitable for a move to open conditions.
Noye, 68, was jailed for life for the road rage murder of 21-year-old Stephen Cameron in 1996 during a fight on an M25 slip road at Swanley in Kent.
He went on the run after the killing, but was captured in Spain in 1998.
He was jailed in 2000 with a minimum term set at 16 years in 2002 by the then Home Secretary David Blunkett.
The parole board considered a request from Noye to be released from Wayland Prison in Norfolk.
Being moved to an open prison is the first stage of the process that usually leads to release.
Such an intervention by the Secretary of State is rare, with fewer than 1% of Parole Board recommendations being turned down over the last five years.
About 40 recommendations out of up to 6,000 from 2010 to this year have been rejected by the Justice Secretary.
Noye is entitled to another parole hearing within two years.
After the Parole Board made its recommendation Mr Cameron's father Ken said he and his wife Toni believed he would abscond from an open prison.
"Finally we have got justice again for Stephen,"  he said.
"He's going to be there for another two-and-a-half years with a bit of luck."
Noye became one of Britain's most notorious criminals through his involvement in the £26m Brink's-Mat raid in 1983 - one of the UK's biggest robberies.
Six armed men posed as security guards and stole 6,800 gold bars from a warehouse at Heathrow Airport.
During the police investigation, undercover officer Det Con John Fordham was stabbed to death in the grounds of Noye's mansion in West Kingsdown, Kent in 1985.
Noye was cleared of murder on the grounds of self defence, but jailed for 14 years for handling stolen bullion.

Members of the National Union of Teachers (NUT) said it was to highlight wider problems including teacher redundancies.
Powys council's cabinet member for schools, Arwel Jones, said he was "surprised and disappointed".
The NUT said it represented about half of teachers in Powys and 83.5% of those balloted voted in favour of action.
The council is currently consulting on plans to reorganise secondary schools.
Mr Jones added: "Strike action will not deflect our programme but could disrupt the work of school pupils at a crucial time."

The city council will contribute £4.4m while £12.6m will come from the FA, Premier League and Sport England.
Four "hubs" will be formed on current pitches to reduce a reliance on council subsidies, an authority spokesman said.
The FA has said it will invest a record £260m into grassroots football by 2019.
The leader of the Liverpool council's Liberal Democrat opposition Richard Kemp, however, has warned the deal could cause "major problems".
He said local residents had not been consulted by the FA and Liverpool City Council, and "practicalities had not been worked through" including the presence of floodlights near local residences.
He also questioned whether the council should be contributing funds when it was struggling to maintain parks due to funding cuts, and when the FA was "one of the richest sports organisations in the world".
A council spokesman said members of the public would be consulted after planning applications would be submitted in the "next few months".
City mayor Joe Anderson said it was a "real coup" for the city as the council had "far less money than we used to".
Where will the grassroots football hubs be?
The sites in the first phase of the programme include:
A city council spokesman said discussions were being held with Merseyside Youth Association, who have run three of the sites for nearly 100 years, to restructure their leases.
FA chief executive, Martin Glenn, said the FA aimed to set up football hubs in 30 cities in the next four years to support its youth development.
Sheffield was chosen for the country's first FA-funded grassroots football "hubs" in 2014, when a £9.6m fund was pledged.
Road rage killer Kenneth Noye has been refused a move to an open prison over fears for public safety.
[NEXT_CONCEPT]
Teachers in Powys are set to go on strike on Thursday in protest over "excessive workload and cuts".
[NEXT_CONCEPT]
Liverpool has been chosen as the recipient of the biggest investment into grassroots football after a £17m deal has been agreed.