Developers say the scheme will help meet housing needs but opponents say it will overwhelm the area.
Councillors vote to refuse permission for the scheme despite officials saying it should be approved.
A report from Harborough District Council says the plans received 199 letters of objection.
Great Glen was one of many areas in Leicestershire affected by severe flooding in January 2025.
It comes after heavy downpour earlier in January, when homes in Great Glen were badly affected.
The David Wilson development would cover an area the size of 13 football pitches.
A man fell from roof beams at a house extension in Thurmaston and died in hospital.
Pub owner Cimi Kazazi says there is "light at the end of the tunnel" after volunteers step in.
Cimi Kazazi said he "didn't think twice" about going to the aid of the driver.
