The Federal Court has formally set aside the approval of the mine and rail project in Queensland's Galilee Basin under the Environment Protection and Biodiversity Conservation Act.
The step was taken at the request, and with the consent, of all of the parties to the court proceedings.
The federal environment department says it will take six to eight weeks to provide updated advice to the minister on the controversial Carmichael coal mine.
The $16.5 billion mine would have been the biggest in Australian history.
The project would involve the construction of a 300 kilometre rail line linking the mine with the Abbot Point coal terminal, north of Bowen.
The Carmichael coal project is expected to export up to 60 million tonnes of coal a year, upon completion.
Bureaucratic bungle over two vulnerable species
Minister Hunt granted approval to the project last July, but the Mackay Conservation Group (MCG) argued in court that he incorrectly assessed its climate effects, ignored Adani's poor environmental record, and failed to consider conservation advice from his own department on the impact of the mine on two vulnerable species.
"This Federal Court decision to throw out Minister Hunt's approval is a victory for land and water, biodiversity, the global climate and also for common sense," MCG's co-ordinator Ellen Roberts said.
"We call now on Minister Hunt to see sense, honour his obligations, and take the opportunity to reject this disastrous project once and for all."
The Environmental Legal Centre's Sue Higginson, who represented the MCG, said the decision meant the mine could not legally operate until fresh approval was granted.
Indian company Adani confident mine will be completed
Adani said the need to finalise the approvals process was "critical" but that it was confident it would be again pushed through.
"Adani is confident the conditions imposed on the existing approval are robust and appropriate once the technicality is addressed," the statement read.
Queensland's State Development Minister Dr Anthony Lynham said it was a matter for the Federal Government to resolve.
"We are extremely disappointed that there's been this delay to Adani in the Galilee basin," Dr Lynham said.
"We ask the Federal Government to sort this out as quickly as possible."
Dr Lynham said he saw the incident as a speed bump, rather than a death knell for the project.
"We'd like to see not much of a delay," he said.
"Adani still has its eyes firmly on the Galilee Basin and the Carmichael project."
Dr Lynham said the state wouldn't provide funding for the project, but didn't rule out other incentives.
Adani must dump Carmichael mine: Greens
Greens Senator Larissa Waters says mining giant Adani should walk away from its Carmichael mine following the cancellation of federal approval.
The party's deputy leader Senator Larissa Waters said Adani's mine would be a disaster for the Great Barrier Reef, the environment, the climate and the economy.
"This is a huge opportunity now for Adani to walk away from this disastrous proposal," she told reporters in Brisbane.
Traditional owners oppose mine
Traditional owners in Queensland Galilee Basin have also voiced opposition to the Carmichael mine.
The Wangan and Jagalingou people said they concerns about the project include the "devastating impacts on native title, ancestral lands and waters, totemic plants and animals, and our environmental and cultural heritage".
The group has registered a native title claim to the area since July 2005.
An started by Adrian Burragubba, calling for an end to the project, has gathered more than 97,000 signatures.
The Galilee Basin has previously been left untapped by miners because of a lack of rail infrastructure to facilitate transport of coal to ports.
With demand for thermal coal expected to double over the next 15 years, the Galilee Basin is set to become the focus of Australia's resources sector.
