The Parades Commission has reversed its decision to let Orangemen march along what it called the "lower stretch of the Garvaghy Road".
The loyalist parade, organised by the Parkmount Arch Committee, had been granted permission to march from Portadown town centre to Victoria Terrace on Saturday evening.
But furious nationalist residents lodged a complaint against the ruling, forcing the Commission to reconsider.
They claimed the route includes the Garvaghy Road - where the Drumcree standoff has flared for years.
Now the the parading watchdog has decided to ban the procession "from the lower stretch of the Garvaghy Road, past Victoria Terrace".
The ruling, issued on Wednesday afternoon, says the march must instead turn left from Shillington's car park onto Castle Street.
It states that the decision is "set against the background of continuing local community tension" and notes that the parade is not a traditional one, but is a new procession to dedicate a new arch.
The DUP’s Upper Bann MP David Simpson has expressed outrage at what he blasted as a U-turn.
"Once again this Parades Commission has been characterised by its weakness," he said.
"Having initially granted permission for this parade they have now conducted an outrageous U-turn and caved at the first sign of opposition by the Garvaghy Road Residents Coalition.
"The Ordinance Survey maps from Land & Property Services can demonstrate that this parade does not even pass along the Garvaghy Road but along Victoria Terrace. However the Commission appears prepared to believe whatever they are told by those who oppose parades."
Mr Simpson said he would seek a meeting with the parades Commission on Thursday, adding: "It is bizarre and deeply disappointing that the Parades Commission appear content to create a new problem in Portadown where none has previously occurred."
Meanwhile, SDLP MLA Dolores Kelly has welcomed what she praised at the "right decision".
"This was nothing more than a cynical attempt by the applicant to up the ante and pull a fast one in advance of the annual Drumcree parade," she said.
"Since the initial determination was issued, there has been increased tension and anxiety within the nationalist community.
In the notification for the march, submitted to the Parades Commission, it is expected that around 200 people and two bands will take part in the parade organised by the Parkmount Arch Committee – the Portadown True Blues Flute Band and Hillhaven Flute Band.