A bypass in south Devon approved by the previous government is not on a new list of road schemes to be built.
Twenty-four major transport schemes have the green light after a Department for Transport (DfT) spending review.
However, the £130m Kingskerswell scheme, which was approved by the last Labour government, is not included.
The DfT said the bypass plan, known as the South Devon Link Road, was to be analysed to determine if it could bid for money from an additional £600m pot.
Local funding query
A group of transport projects around the country are to be analysed by the DfT to see whether they can join the group to bid for some of the £600m.
The decision as to whether the Kingskerswell scheme could join would be made by January 2011, the DfT said.
Councils in areas with projects that are allowed to join would be challenged to consider the cost, scope and possibility of local funding when bidding for some of the £600m, the DfT said.
MPs in south Devon said they would continue campaigning and working with local councils to ensure the bypass was built.
Torbay Liberal Democrat Adrian Sanders said: "It is important to remember that the bypass is only postponed, not cancelled.
"The announcement is not good news, but Torbay and Devon councils must now put all their efforts into bidding for funding - not only from the government, but also from other sources."
Plans for the controversial Devon bypass, which have been ongoing for more than 50 years, have split the community.
Those in favour claimed it was vital to the economy. Those against said it would destroy the village of Kingskerswell.
Elsewhere in the county, improvements to junction 29 of the M5 east of Exeter have been approved to provide access to new housing and employment areas.