Developers are appealing against a decision to stop 1,000 houses being built between two villages on the outskirts of Cheltenham.
The scheme, which would see Bishop's Cleeve eat up Gotherington, was rejected by Tewkesbury Borough Council's planning committee before Christmas.
At the time, councillors said developers Comparo could not extend their masterplan without submitting another planning application first.
But now the organisation behind the scheme has launched an appeal to the Secretary of State for communities and local government, which has triggered a full planning inquiry.
If the decision is overturned, Comparo, which already owns the rights to build 450 homes north of Bishop's Cleeve, at Homelands Farm, could link the two settlements via a continuous stretch of land along Gotherington Lane.
Peter Richmond, borough councillor for Cleeve West, said: "The developers thought they could just extend the scheme without submitting another application. But it doesn't work like that. It seems they wanted to capitalise on the Regional Spatial Strategy's suggestion that there should be 1,000 houses between Gotherington and Bishop's Cleeve.
"But the escarpment there is where all the water comes off – it's a flooding hot-spot.
"We've also reached capacity in Bishop's Cleeve.
"Even if you were to put just the 450 homes here – with at least 1,000 people and their cars – it would place an unbearable strain on amenities."
Tewkesbury MP Laurence Robertson echoed his concerns.
He said: "I'm totally opposed to this.
"It's going to bring about a coalescence of the villages, when the vast majority of people in the area don't want it.
"The development would cause traffic problems, and problems with floods.
"I've taken photos of land that's very wet in that area.
"By taking up so much green space it would throw the water elsewhere. And we must remember that a lot of houses in Cleeve were flooded in 2007."
Proposals to build 1,800 houses on Homelands Farm were originally put forward by developer Taylor Wimpey in 1996.
Despite repeated attempts to gain planning permission, a series of planning applications for up to 1,800 homes were rejected by Tewkesbury Borough Council and Government inspectors.
In June 2007, the developer submitted new plans for the site, which were again rejected by the borough council.
But in February 2008, the area to the north of Bishop's Cleeve was earmarked for 1,000 new homes in the South West Regional Spatial Strategy.
The council withdrew its objections to the site days before a planning inquiry in March.
Hundreds of residents signed petitions against the plans and attended the inquiry, which went in favour of Taylor Wimpey.
The developer has since sold the building rights to Comparo.
A date for the latest inquiry has yet to be determined.