Port Talbot residents are welcoming the news after a two year fight against the proposals.
The Welsh Government blocked the jumbo jail last May saying it would not allow building to take place until criminal justice was devolved to Wales.
Now the Ministry of Justice has confirmed it is no longer considering the site.
Campaigners are welcoming the u-turn claiming it was far too close to local schools and would have caused no end of traffic congestion.
MP for Aberavon Stephen Kinnock said: “This is a real victory for the people of Port Talbot. David Rees AM and I have been working hard with our constituents to make clear the reasons why Baglan was an utterly inappropriate location for a new super-prison, and I’m pleased that – after a campaign lasting almost two years – the UK government has admitted defeat.
“At a public meeting that I called in September 2017, myself and hundreds of Port Talbot residents made it absolutely clear to Department of Justice officials that the suggested location was far too close to local schools, would cause no end of traffic congestion and would create problems for local businesses given the nature of the construction. I later reiterated those points in meetings with the Prison Minister Rory Stewart and Secretary of State for Wales Alun Cairns, and I’m pleased that – with support from the Welsh government – we’ve persuaded the UK government to see sense.
“The UK needs to modernise its prison system, but I hope in future the UK government reaches out to the Welsh government in a more constructive way to ensure more appropriate locations are put forward.”