The £25,000 installation would have featured a metal sheep standing on three bags of wool and been illuminated at night.
Its developer said it would act as a “Welcome to Beverley” feature, referencing the nearby Shepherd’s Lane and the town’s farming history.
“It is deliberately quirky and humorous so that it has mass public appeal and is particularly enjoyed by children,” the application said.
But as well as traffic concerns, council officers said they feared it would become a tourist attraction, which would be risky at the “very busy interchange”.