Wakefield Council's cabinet agreed a new waste management strategy on Tuesday based on composting rather than burning rubbish.
Members of Residents Against Toxic Scheme (Rats) protested against the incinerator, which they believed would have been sited at Welbeck tip.
Paul Dainton, chairman of Rats, said: "The fact the council is going for composting is the best news for Wakefield since the end of the Second World War.
"We are over the moon Wakefield Council has listened to its ratepayers. This is an absolutely massive victory – we are highly delighted."
Mr Dainton said after 15 years of campaigning, Rats may have to call time on its protesting and he might be free to go back to writing about local history.
Barbara Jodrell, chairman of Normanton Environmental Society Together (Nest), said: "I would like to congratulate everyone involved and hope the council will now use its energy to do more recycling."
A council spokesman said: "Incineration has not emerged as the preferred option for dealing with Wakefield's waste and the council does not envisage it being used."
She said while an incinerator was an option, no site had ever been identified or discussed for such a facility.
The cabinet's decision follows the biggest public consultation exercise in the council's history, involving thousands of local people and organisations.
Aims identified were to reduce landfill, increase recycling and protect the environment. Wakefield people preferred schemes achieving higher rates of recycling but views were split on treatment of remaining waste.
Mechanical biological treatment, which gives greater recycling levels, was the method chosen for this leftover rubbish and should allow about half of the district's waste to be recycled and composted.
Some treated waste may still need to go to landfill, but in far smaller quantities.
A public and private partnership was recommended to deliver the new system, using private money but with the council retaining management control.
Coun Betty Rhodes, cabinet member for environment services, said: "Our priority is sustainable waste management for the people of this district, so that the environment and its resources are protected for this and future generations."
In 2002-3 Wakefield district produced 203,306 tonnes of waste. Most went to landfill but 12.4 per cent of all household rubbish was recycled.
The council has to achieve 18 per cent recycling and composting by 2005-6 and a national target of 33 per cent comes into force in 2015.