Campaigners opposed the plans to build a hotel and shopping complex in a conservation area.
The plans to knock down the old Bank House and a former bakery have, however, been approved by members of the Development and Management Committee.
The development for the site on Atholl Road will include 16 flats, seven retail units and a 52 bedroom budget hotel.
Community groups voiced strong opposition to the plan to demolish the landmark building on Atholl Road.
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The council received 103 objections and three submissions backing the proposal. Those objecting the proposal said the supposed economic benefits of building a hotel and shopping complex did not outweigh the arguments for conserving the site.
They claimed the development would have a negative impact on the conservation area.
Although Bank House is not a listed building, it is within the Pitlochry Conservation Area. While building does retain many original features, the council said the former bakery buildings had been substantially altered and had no architectural value.
Andrew Holmes, community council chairman told STV: "I extremely disappointed, today was the last day of the Scottish Government's consultation on community empowerment and this community has been completely disempowered by this decision, it flies in the face of community sentiment and it flies in the face of the council's own conservation policies."
(IT)
