Muchos Nachos will remain listed as a community asset, Chichester District Council has confirmed.
Property owner Grace Holdings Limited put in a legal challenge against the status, which gives the 400-year-old building protection against future development.
The company’s application to turn the site into housing was turned down in June.
City councillor Sarah Sharp said it was a ‘very good Christmas present’ for the people of Whyke and others who had worked so hard to support the nomination.
She said: “I am obviously relieved that the council decided in the community’s favour to back up their original decision to nominate Muchos Nachos as a community asset.
“We took this challenge very seriously and put a huge amount of work into the rebuttal – just in case the freeholder decides to take the matter to a tribunal.”
She said her particular thanks went to all the community groups who wrote letters to confirm they used the premises, Chris and Chrissie Boxall who helped organise a petition, and Bill Sharp for his knowledge of case law.