The Joint Committee for Review of Administrative Rules voted to suspend the PSC128 rules, which had been developed by consensus over two years by the industry and stakeholders.
The rules, were submitted by the Wisconsin Public Service Commission for approval in September, were designed to solve a development drought in the state caused by variation in siting regulations between counties.
Republicans on the committee said they voted against the bill because of concerns the setback distance was too small to protect health and safety, and the effects of wind turbines on land values, according to reports.
The rules would have applied to projects under 100MW and set a safety setback distance from houses and occupied buildings of 3.1 times the maximum blade tip height of the wind turbine.
They also included regulations to deal with issues such as noise and shadow flicker, and requirements to pay landowners within half a mile of a wind farm.
The American Wind Energy Association (AWEA) criticised the decision, and said that the wind industry would move to surrounding states.
AWEA director of business development Jeff Anthony said: "The signal sent today is that Wisconsin is ‘closed for business.’ If the Walker administration and the state legislature were truly as serious about Wisconsin remaining ‘open for business’ and creating well-paying jobs in Wisconsin, this action today would not have taken place."