Alison Charlton and Allan Hamilton applied for resource consent to subdivide their 19.6ha site in Highcliff Rd near Pukehiki into two smaller plots.
An application was also made to cancel the amalgamation covenant which holds the two properties together.
The proposed subdivision was a non-complying activity under the Dunedin City Council's district plan because both sites would be below the 15ha minium lot size for land zoned rural.
Ms Charlton and Mr Hamilton had lived together on the property for eight years but had since separated and dividing the property would allow them both to continue living there independently.
A hearing on the application was held in February.
The application was opposed by neighbours and other organisations on the peninsula, including the Save The Otago Peninsula group and Larnach Castle.
All those opposed were concerned granting consent would set a precedent for other similar plots of rural land on the peninsula to be developed.
Commissioners Andrew Noone, Ros Day-Cleavin and Andrew Whiley ultimately declined the application.
In his summary of the committee's decision, Mr Noone noted it had not been an easy decision for the commissioners
The commissioners were concerned the proposal would create an undesirable precedent which would undermine the minimum size requirements for rural land, which could be replicated on other undersized sites in the Otago Harbour and Otago Peninsula zones.
* It was earlier incorrectly reported that the decision had been appealed.
