In a dramatic 7-5 vote, the Martha’s Vineyard Commission denied a major expansion plan for the Hob Knob Inn Thursday night, after more than a year of hearings and review, offering a narrow but clear rebuke of what commissioners called creeping commercial development surrounding Edgartown’s Main street.

The Thursday vote, which went late into the night after commissioners spent more than two hours grappling with a flurry of project conditions, marked a tough, surprise denial from the powerful regional oversight agency, which often places stringent conditions on projects but rarely rejects them outright.

“I’m not opposed to the expansion of this project,” commissioner Christine Todd said when it came time for a vote. “But what I think is being proposed is excessive, considering the neighborhood.”

The vote followed long discussion, with commissioners Christina Brown, Fred Hancock, Michael Kim, Ben Robinson, Linda Sibley, Ernie Thomas and Ms. Todd in the majority, voting against the plan. Commissioners Clarence (Trip) Barnes, 3rd, Kathy Newman, Doug Sederholm, Jim Vercruysse and Joan Malkin voted in favor.

Four current commissioners — Ted Rosbeck, Brian Packish, Jeff Agnoli and Jay Grossman — could not vote on the project because they only recently joined the commission. A fifth commissioner, Josh Goldstein, did not attend enough public hearings to vote.

Billed by the hotel as a necessary expansion to stay competitive in the town’s growing hospitality industry, the Hob Knob project presented a unique test for the commission, forcing it to weigh the obvious benefits of economic development with its broader mission to preserve the quiet residential character of Main street and its historic clapboard whaling houses.

In public hearings, a familiar cast of neighbors railed against the project, which even after multiple redesigns would have still doubled the number of rooms in the boutique inn, expanded its footprint across Tilton Way and included a larger spa for guests. Abutters argued that the proposed changes went too far, stretching the limits of a once-quiet neighborhood already thrown into flux by overdevelopment.

On Thursday, a civil, yet divided commission concurred.

“There was testimony during the public hearing about what one neighbor called creeping commercialism, and I couldn’t help writing it down, because I don’t think it is just creeping,” Ms. Sibley said. “We really need to look seriously at the impact commercialism has upon the character. When people are driving down that road, what are they seeing? What are they feeling? We are losing the feeling of the old captain’s houses, and becoming a string of inns. I have a problem with it.”

Michael Kim, Gov. Charlie Baker’s appointee to the state-chartered commission, agreed, arguing that the commercial expansion in a residential neighborhood, although allowable by special permit, merited unique consideration.

“This is essentially a spot zoning change, and that is a very high bar,” Mr. Kim said. “We need a big benefit to compensate for some major detriments. And aside from the economic benefit, what is the benefit? There are detriments. But what is the benefit?”

During deliberations, commissioners struggled to answer the question. Although many noted that the project would add tax revenue and buoy business in the town, and that the project was consistent with the Island plan, the detriments presented by the project’s impact on energy, open space, climate change, scenic values, housing and especially traffic outweighed the benefits, they said. While most commissioners deemed the development appropriate under zoning, more than half felt it was non-essential.

“I have a problem with the essential part,” commissioner Fred Hancock said. “While it could be appropriate . . . it is really going to increase use on this property. By those standards, I have a hard time with it.”

Not all commissioners saw it that way. Mr. Barnes, who made the initial motion to approve the project, felt that the expansion provided needed new hotel rooms in a tourist town that sorely lacks them.

“The character is good, and the identity is good. I think it looks fine. I think it’s a good plug for the town. It’s bringing in people with a lot of money,” Mr. Barnes said. “Bear in mind, we need something to live on. A lot of people losing track of that.”

Other commissioners who voted yes, including Ms. Sederholm and Ms. Newman, cited subtler reasons, arguing that it was a reasonable expansion of use in an already dense district.

“This is smart growth,” Ms. Newman said. “If we’re going to add facilities, in my mind, this would be one of the places to add them. Because we are not taking up open space in the way we’ve considered other projects.”

Before the vote, commissioners spent nearly two hours discussing potential conditions for the project, including a requirement that the applicant come up with a proposal to replace the loss of three housing units at the site of the current Tomassian Law Office at 124 Tilton Way. Other proposed conditions included four, two-bedroom rooms for workforce housing, a requirement that the hotel hold no organized events or weddings, no food service, and close the spa to the public.

The hotel owner, represented by architect Patrick Ahearn and attorney Sean Murphy, had previously decided to eliminate a pool.

But those conditions and offers ultimately did not matter. While the commission received more than 50 letters of correspondence from neighbors, it received no word on the project from the town of Edgartown. That silence may have doomed it, commissioners said.

“I think there’s a serious question about what the town of Edgartown wants,” Ms. Sibley said. “I think that should be answered by a town meeting vote to change the zoning, rather than creeping commercialism that relies on special permits. I just have a problem with that.”

“And the poor character,” she added.

The decision is the second denial of a major Edgartown development by the commission in recent months; it voted 10-4 last summer to reject a 54-acre, 29-lot subdivision off Meeting House Way. Developers are appealing the decision in superior court.