Coun Mazher Iqbal, cabinet member for business and investment, said he was not happy with work undertaken so far and wanted more time.
The Castlegate neighbourhood is where the remains of Sheffield Castle lay buried, and is home to the city’s decaying Grade II-listed Old Town Hall.
Sheffield Council had announced plans to make it a conservation area, giving it added protection against unsympathetic development which could harm its unique character.
There was due to be a six-week consultation on the proposal but when people turned up for a two-day event, they found a note on the door of the Old Post Office in Fitzalan Square saying it had been cancelled.
Coun Iqbal told a Cabinet meeting that he could not commit to a date for another consultation.
“I am sorry I had to cancel the consultation. I was not happy with the work undertaken so far and further work will be done down there.
“The conservation area and status should act as a catalyst and not as a barrier. A conservation area should enable the regeneration and development of Castlegate.
“One of the biggest challenges we face is when developers are looking at investing in certain places as viability is a huge issue.
“At one end I have developers and at the other end I have civic and conservation groups so I need time to ensure the policy is balanced.”
Conservationists say some buildings in Castlegate are protected due to their listed status but there are many other buildings, including the Old Coroner’s Court on Nursery Street, which are vulnerable.
The council’s draft plan for Sheffield city centre, published last year, included a commitment to making the most of Castlegate’s heritage.
It said this would be ‘supported by the designation of a Castlegate Quarter Conservation Area which brings statutory protection and potential access to additional resources’ for the district’s most historically important buildings.