The Environment Agency has withdrawn £10m of funding for a coastal defence scheme in Suffolk that it approved in principle in June.
The agency had originally offered the money so that work in Felixstowe could start in the new year but now says a final decision will be made in April.
Suffolk Coastal District Council was told on Thursday the funding offer had been withdrawn.
The council said it was "greatly disappointed" but pledged to fight on.
Deputy Leader Andy Smith said he had been offered help by the Conservative Suffolk Coastal MP Therese Coffey.
"We have been working in partnership with the Environment Agency to get this much-needed scheme in place to help protect homes and businesses in central Felixstowe," Mr Smith said.
'Last minute delays'
"We will be strongly urging those at the most senior level of the Environment Agency to review this disastrous decision.
"I am grateful for the immediate support offered by Therese Coffey MP.
"Last minute delays in funding are not new for Felixstowe as we had similar problems before the South Felixstowe works could be begun.
"We will do all we can to ensure that the central scheme is also under way as soon as possible," Mr Smith said.
The Environment Agency said in a statement it had only indicated in June that the money might be forthcoming and there had since been a revision of budgets.
"The indicative funding allocation proposals are still subject to discussion and consultation with local flood and coastal committees in January," a spokeswoman said.
"A final decision on the programme of schemes to be delivered next year will be made by the local committees in April."
The Central Felixstowe project covers the seafront from Jacob's Ladder to the War Memorial.
The scheme would safeguard nearly 1,500 homes, local businesses, tourist beaches, recreational gardens and key facilities from erosion and flooding over the next 100 years.