"Canua Island", a 1,750 square-metre (18,800 feet) motorised platform featuring a restaurant, bar lounge and pool, had been moored at the port of La Seyne-sur-Mer in southeast France while its owners awaited permits.
"It was made clear to us that we should not wait for this summer," the project's founders said in a statement which claimed they had been the "victims of a political vendetta".
With capacity for 350 people, the platform was intended to be a new offshore entertainment space for wealthy holidaymakers, with its backers including former Olympics yachtsman Marc Audineau and windsurfer Tony Philp.
The project had the support from one commune in the area, Mandelieu-La Napoule, where it intended to anchor, but it was contested by the head of the broader Provence-Alpes-Cote d'Azur region Renaud Muselier, a member of President Emmanuel Macron's ruling party.
Its owners were told Monday that permits to operate had been denied by the government, according to project chairman Jean-Bernard Falco, who said 100 jobs and an investment of 16 million euros were now in peril.
Environmental groups have long battled for increased protection for sea life and the coastline of the highly developed Cote d'Azur, long considered a playground for the rich and famous.
- Eco-responsible -
The French Ministry of the Sea said it had opposed the island project on environmental grounds.
"The government's position is that the development of an artificial island is not compatible with the need to strengthen marine environmental protections," the ministry for the sea told AFP on Monday.
The ministry explained that new legislation aimed at accelerating renewable energy development strictly regulates the installation of floating infrastructure at sea.
Furthermore, the project was proposed for a coast that was "already highly urbanised" and in a sea "plagued by pollution".
Canua Island's backers said there was "no vessel in the Mediterranean today that is as eco-responsible" as their floating island, which planned to recover its wastewater and use bio-fuel made from cooking oil.
They said that public innovation bank Bpifrance and regional authorities had supported their business venture.
"At no time, in the seven years since we began this adventure, had those who opposed us since April shown the slightest doubt or opposition," said their statement.
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