Everton's desire for a new stadium were thrown into doubt when their plans to move to Kirkby were 'called in' by the Government.
The decision is a major blow to the club's plans to move to a stadium that is big enough to allow them to compete with the top sides in the Barclays Premier League.
The Government have now decided that they want to look at the whole scheme, bitterly opposed by Kirkby residents and many of the club's fans.
Everton have been involved in an on-going row with a section of their support who are opposed to the move from Goodison Park to a new home outside the city boundaries in neighbouring Knowsley.
And this decision by the Government will be a major boost to those supporters who are furiously opposed to leaving the city.
Everton already have planning permission for the £400million scheme, a joint venture with Tesco.
But they have also faced fierce opposition from Kirkby residents, with the scheme likely to change the face of the town's centre.
Everton had been hoping their plans would get the go-ahead, but the decision tonight is a serious blow.
Former chief executive Keith Wyness, who quit last week, had gone on record as saying that any 'call in' would kill-off the whole plan to move from Goodison Park.
The club have consistently distanced themselves from that view, but this is still a real body blow during a summer that has seen them hit by continued discontent.
And that has included doubts about chairman Bill Kenwright's own future involvement. Manager David Moyes has suffered speculation that he could leave the club while Everton have failed to make any major moves in the transfer market.
It had also been suggested that the club would be more interesting to outside investors if they did get the approval for a new 50,000 seater stadium. Now any such investment could be in doubt.
Everton reacted to the decision saying in a club statement: 'We are disappointed by the decision. Having spent more than two years working diligently on a project which would not only provide Everton Football Club with a new home but also regenerate Kirkby, we had hoped to avoid a Government call-in.
'Indeed, it was only in June that Knowsley Borough Council's Planning Committee voted by a majority of 20-1 to grant planning permission.
'We shall now engage in detailed discussions with our development partners, KBC and Tesco, to assess what options are open to us.
'It is important to stress that this decision does not spell the end of the Destination Kirkby project - but it will, self-evidently, precipitate a period of reflection, assessment and re-evaluation.'
But the call-in could delay the plans for more than a year. By then the scheme will have been hit by escalating building cost, particularly the price of steel.
The call-in decision will again open the debate over whether Goodison can be re-developed, or whether Liverpool Council - a long-term objector to the move - can come up with a new home for the club.
Kenwright said today: 'A ground move is certainly crucial to the economic future of Everton, I have said it a million times that I love Goodison Park but we have to move for economic and financial reasons.
'We have to get more income into the club to begin to compete with those clubs I have been talking about.
'That is the reason we have been contemplating it and the truth is we have had enormous support from Knowsley(Council), from Tesco, and we have not had that from Liverpool(Council). That is the bottom line of it.'
The club's new acting chief executive Robert Elstone - who replaced Wyness only yesterday - said: 'The economics of the Premier League are becoming more and more demanding.
'It is important Everton keeps pace with the spending powers of our peer group and our rivals in the league.
'To do that a new stadium is critical, and the strongest option available to the club - in terms of affordability, and what it can do for us in a business sense - is the one at Kirkby.
'While Goodison is a wonderful old stadium, it does constrain the club financially.
'This is the single biggest opportunity which the club faces, and I recognise it is a hugely emotive issue.'
The Leader of Knowsley Council, Councillor Ron Round, said: 'We are extremely disappointed as a Public Inquiry will delay the development - indeed this delay, in the current economic climate, places the entire project in jeopardy.
'From all of the consultation we have carried out, we believe that the majority of local residents are in favour of transforming Kirkby. The local elections in May this year gave the Council a clear mandate to continue with the scheme.'
He continued: 'We have searched long and hard for years to attract the right investor to Kirkby and this scheme cannot be equalled.
'At this point in time, there is no plan B for Kirkby and no plan B for Everton Football Club.
'We will do all we can to keep the scheme alive and make sure the future of Kirkby is not put at risk.'
The public inquiry is expected to be held within the next 12 months. Tesco originally submitted its planning application in January this year.
Councillor Round added: 'It was disappointing that some neighbouring authorities continued to object despite the improvements they requested having been made to the scheme.
'Their continued objections, therefore, could only have been for political reasons.
'It is particularly regrettable that some community leaders in Merseyside seemed unable to do the right thing for the Merseyside sub-region, which was to put aside their personal views in relation to Everton Football Club.
'This will only serve to damage the reputation of the region and undermine investment in Merseyside in the future.'