Party in the Park has been held at the Mosgiel Memorial Gardens almost every year since it started in 2006.
The event moved to Peter Johnstone Park for two years, but after public consultation it was back at its "original home" at the gardens in February this year.
When Festival of the Plains chairman Ian Chalmers requested permission to hold Party in the Park at the gardens again next year, the council declined.
Council parks and recreation acting group manager Scott MacLean said the request was originally declined due to concerns about damage caused to the site and facilities during a previous event.
"We understand how important this event is to the local community, and so DCC staff continue to work with the event organisers to find a way forward, and we are keen to reach a positive outcome," Mr MacLean said.
Mr Chalmers said he was disappointed in the council’s decision.
He said damage such as singed grass at this year’s party was easily rectified - it disappeared after some rain and lawn mowing.
He thought the council had done a "magnificent job" upgrading the play equipment, hence why the gardens were the ideal venue for the event.
"It’s the best park in Mosgiel."
As well as having plenty of play equipment, the gardens had a fenced playground for young children, was reasonably sheltered and had public toilets.
It had a wonderful atmosphere and its central location, in Hartstronge Ave, meant it was easily accessible, he said.
Alternative locations were not suitable as the committee would have to hire much of the equipment and facilities, most of which was readily available at the memorial gardens, Mr Chalmers said.
He planned to submit a plan of the new proposed layout and a health and safety plan to the council this week.
Mr Chalmers was happy to move stalls around to fit with the council’s regulations.
Ensuring the event was a free day out for families was the top priority, and something he was proud of.
The only cost would be if they wanted to buy something to eat or go on a ride, he said.
"Our committee consists of volunteers whose focus is on working for the community but it is becoming increasing more difficult to hold events such as Party in the Park."
