The 5.2 acre property is on the 9900 block of Tower Lane, which is a private road. The law firm representing the Saudi prince has withdrawn the application for a proposed 85,000-square-foot compound, roughly the size of the famed Hearst Castle.
The compound would have included a 42,000-square-foot main resident, villa, guest house and staff's quarters.
Residents complained that the proposed project was too outsized for the neighborhood of stately mansions.
"This is a huge victory for residents of Los Angeles," neighbor Martha Karsh said in a statement. "This development scheme should never have been allowed to get as far as it did."
"The project is going forward, but it is going forward with some substantial revisions," said lawyer Benjamin Reznik. Reznik said the firm will resubmit plans that would eliminate the villa and staff quarters - a reduction of about 30,000-square-feet.
Such celebrities as Jay Leno, David Beckham and Bruce Springsteen have homes in the area.
The Associated Press contributed to this story