The program would have delivered and picked up syringes for alleged drug use in Santa Ana.
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The California Department of Public Health had previously approved the application - that approval has now been rescinded.
The application filed by the Harm Reduction Institute is now back in "pending" status. The nonprofit organization applied to operate the program in an effort to reduce the spread of HIV and hepatitis C.
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But Santa Ana's city manager, mayor and police chief have each expressed adamant opposition to the needle-exchange program, saying that they were concerned about the potential public health and safety impacts.
"Stand up, speak up loudly, and say, 'No, not here.' Take it somewhere else," Santa Ana Mayor Valerie Amezcua said in an interview. "My biggest fear is that one of our children picks up a needle, a used needle, which carries diseases and a lot of other things."
The Harm Reduction Institute said it chose Santa Ana because the city has the highest rate of HIV transmission in Orange County. The mayor said that's not a good enough reason.
Yet the needle-exchange program is not completely off the table. The California Department of Public Health has asked the Santa Ana Police Department to consult with the state about the application.