A well-financed campaign to build a casino in the heart of New York's theatre district collapsed on Wednesday as a government-appointed panel voted down the proposal.

Opposition to the project was led by community groups who said a casino would lure unsavoury people, and theatre interests who argued it would cut into Broadway's business.

The Caesars Palace Times Square project, a venture whose sponsors include rap musician and entrepreneur Jay-Z's company Roc Nation, failed to clear a key hurdle at the Community Advisory Committee.

The CAC, which is composed of representatives of state and local officials, voted down the proposed US$5.4 billion project by 4-2.

City Council Member Erik Bottcher said he voted no after "countless" conversations with constituents.

"This is not a decision I took lightly," Bottcher, who had been considered a swing vote on the proposal, said in an Instagram post.

"All economic development opportunities deserve strong consideration. I believe casinos must clear a particularly high bar, requiring a uniquely strong degree of community buy-in before being sited in a neighbourhood," he added.

"Despite extensive outreach by the applicants, that level of support has not materialised."

The vote follows two rowdy public meetings at which the CAC heard from dozens of backers and opponents of the casino.

Supporters of the project included construction unions, neighbouring restaurants and business groups that viewed the casino project as a source of additional customers.

Other Caesars supporters included the Reverend Al Sharpton, whose organisation was poised to oversee a new US$15 million civil rights museum financed by the casino coalition if the Times Square proposal had been built.

But Broadway League President Jason Laks, who led the opposition, praised CAC members "who looked at the facts, listened to the residents, and stood up for this neighbourhood and the theatre community."

"This was a vote to protect the magic of Broadway for the one hundred thousand New Yorkers who depend on it for their livelihoods, and for the tens of millions who come from around the world to experience it," Laks said in a statement. "A casino can go anywhere, but Broadway only lives here." (AFP)