Rotherham Metropolitan Borough Council turned down planning permission for the vertical core test well during a meeting on Friday.
The controversial exploration for Woodsetts, earmarked for a site approximately 30 metres from Dewidales Ancient Woodlands, received thousands of public objections.
Rotherham council's decision comes after similar applications for Harthill in Rotherham and Marsh Lane in Derbyshire were also rejected.
Chris Crean, Friends of the Earth Midlands campaigner, said: “It’s deeply significant that Rotherham Council rejected a second INEOS test drill application in as many months.
“Along with Derbyshire’s rejection of the Marsh Lane application last month, and Rotherham Council rejecting the Harthill application in January, this now makes three INEOS applications rejected by local councils in short succession already this year.
“Surely it’s time for would-be frackers to accept that this risky technology is not needed, not wanted, won’t address the challenge of climate change, and their best bet is to stop throwing good money after bad, and invest in popular, clean energy alternatives instead.”
INEOS said it was disappointed by the decision, saying it felt the plans had presented the right amount of ecological mitigation.
A spokesperson said: "The application allows for the drilling of a single vertical core bore well to gain scientific knowledge of what is below the surface, which has been agreed by many councils many times in the past to support the coal industry. This is no different. It is important to note that a completely separate application must be made for the extraction of gas.
"Shale gas is a resource that is of strategic importance to the UK and issues of energy security always have to be factored in. As last week demonstrated, the UK’s energy supply is in a much weaker position than many believe, with sudden adverse weather events bringing the UK to the brink of running out of gas. Not only does this have a knock-on effect on industry, there is the real potential that domestic consumers will be unable to heat their homes in times of energy stress.
"Shale gas is offering us the potential to have our own native natural gas industry, strengthening our security of supply and making us less reliant on countries such as Russia or the Middle East."