The Parades Commission has banned Orangemen from marching along the nationalist Garvaghy Road in Portadown, in their annual Drumcree parade scheduled for July 8th.
"The decision is set against a background of continuing local community tension and recognises the real possibility of further damage to community relations and of public disorder should the parade be allowed to follow its full route," the Commission said in a brief statement.
The ban comes as the peace process faces growing pressure following First Minister Mr David Trimble's resignation over decommissioning.
In its ruling, the commission said it was conscious the decision represented no change over the previous three years, but said it did recognise some "promising developments" in the past 12 months.
In recent weeks there had been an exchange of documents between the two protagonists, maintaining that momentum was "highly desirable", said the commission.
But it recorded its "dismay that a combination of high levels of mistrust and poor communication have continued to militate strongly against the interests of both Portadown Orangemen and the people of the Garvaghy Road in resolving this issue."
It insisted some element of trust could only be established through engagement, and the commission said it saw an important role for the wider community in Portadown and beyond in establishing that.
The commission has long been arguing for engagement and said: "What is badly needed in Portadown, in any engagement, is a real attempt to address the legitimate concerns of others, and a preparedness to accommodate those concerns, where it is within the power of the protagonists to do so."
The SDLP’s Ms Bríd Rodgers welcomed the Parades Commission’s decision.
She said: "the entire community is sick of the disruption and despair which the marching season continually visits on the people of Northern Ireland".
She said the issue of Orange marches on the Garvaghy Road could only be resolved through dialogue between local residents and the Orange Order.