Sally Hanson, 35, and Jamie Hanson, 44, had submitted plans to transform a disused outbuilding to the rear of The Thornhill in Town Gate.
The application - submitted in July 2021 - was for "refurbishment of the outbuilding including re roof works and alteration to create an external bar, deli and dining facility".
Sally and Jamie sought to create a new deli serving a range of homemade and locally-produced goods at the pub, which dates from around 1800 and was Grade II listed in 1989.
The deli would have featured a new entrance created via double doors to the front, with new windows inserted within the existing openings to the former stable.
A new service area for customers would have been formed including a till and counter, with fridges to store goods and a pizza preparation area.
New retail shelving would have been installed to the rear with two open areas of seating internally capable of accommodating approximately 30 people
However, plans have now been rejected by the council amid fears the new site "would adversely affect neighbouring amenity through an intensification of the site".
The rejection report also made reference to "potential smells and odours" and "additional noise and disturbance" for neighbouring properties on the street to the rear.
Plans would "lead to a parking dominated frontage harming the character and appearance of a landmark building within the Conservation Area", the report stated.
The planning report concluded: "The proposal is considered to have a significant detrimental impact on neighbouring residential amenity, the character and appearance of a listed building and adverse highway safety impacts.
"For the reasons outlined in the above report and taking into account all other material considerations it is concluded that planning permission should be refused."
Speaking to the Yorkshire Evening Post, Sally and Jamie said the rejection had been "a huge blow".
Sally and Jamie - who have lived in the village their whole lives - told how their intention had always been to "serve the local community" but had seen Calverley go from having "lots of thriving businesses" to having very little - and "what seems to be a large amount of resistance to change".
Covid hit their pub "hard", the owners said.
They have worked tirelessly to keep going, "keep motivated and keep the business fresh and profitable" with new ideas.
The building - which was originally a stable for horses - will be "derelict and falling into a state of disrepair" without the overhaul, Sally and Jamie said.
Speaking to the YEP, Sally said: "Our plans for the outbuilding at the Thornhill were to convert an otherwise completely vacant and disused characterful building into a deli servicing the local area by providing a community hub.
"We planned to serve fresh produce, fresh breads and Thornhill made chutney, sauces, pies etc.
"We initially put an application in in April last year which was rejected as there were a few things that were seen to be unsympathetic to the conservation area and our immediate surroundings.
"Subsequently we submitted some new plans which we believed to be much more amenable and in line with what the planning officer had suggested.
"It has in fact been the first we have heard about this second application being rejected to have read an article in a local paper as we have never been officially informed.
"We put the application in in July so there has been a long time between the application going in and it again being rejected."
Sally discussed an application by Palmer Plants which was recently given the green light by the council, as reported in the YEP."We don't quite understand how a much larger development can be passed just down the road", she added.
"Although we fully support the development at Palmer plants, this will inevitably bring a wider footfall and volume of traffic into the area which was one of the main objections to our development.
"Our intention has always been to service our local community.
"We have lived in the village our whole lives and are now lucky enough to be bringing our own children up in the village.
"But we have seen Calverley go from having lots of thriving businesses to having very little and what seems to be a large amount of resistance to change.
"Covid for us, like many other businesses, hit us hard and we took advantage of the bounce back loan in order to do just that, Bounce Back.
"We have worked tirelessly to keep going, keep motivated and to keep the business fresh and profitable with new ideas and to have plans rejected has been a huge blow."
Sally hoped the rejection was not the end of the road for their plans.
"We would like to think that if we could gather enough support and work with the council on amendments that this is not the end of the road for the idea as we do believe it would be an asset to the village."
The rejection can be appealed within the next 28 days according to the report.