Voters in Obwalden have rejected controversial plans by the canton to reserve sections of its land for its wealthier inhabitants to build homes.
The canton has already introduced a flat-tax system to attract rich people to the area, which has enjoyed public support. But observers say the widely criticized move over land went too far.
The ballot result stood at 8,881 no votes to 5,365 yes votes.
Obwalden's plans caused quite an uproar in Switzerland with Swiss Environment Minister Moritz Leuenberger earlier this year calling them a form of "apartheid".
The Obwalden authorities hit back, maintaining that the areas, officially designated "high quality standard of life zones of cantonal interest", were needed. They were to form part of the canton's strategy of increasing its tax attractiveness compared with other cantons. Officials said that local communities would always have been consulted.
Voters appeared to be more convinced by the arguments of the central canton's Green Party, which said that the zones would result in the population being divided into the haves and have nots. It added that it would mean more building in the countryside.
Obwalden raised the bar in 2006 by voting for a regressive income tax that obliged low earners to pay a higher rate of tax than those who brought home big salaries.
This system was outlawed by the Swiss Federal Court 18 months later as being unconstitutional and was replaced with a flat-rate tax model.
swissinfo.ch and agencies