The proposed servo is in a triangular block of land, zoned general rural, at the corner of Bennett Street and the road reserve for the future Lord Street extension.
The application was first rejected at a March 18 meeting, but the State Administrative Tribunal took the decision on review so councillors could reconsider.
Directly next door to the servo are two homes and over the Lord Street road reserve is Pinelli Estate winery.
The homeowners argued the servo would exacerbate traffic issues and cause odour, noise and light emissions, which would detract from the amenity of the suburb.
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READ NOWSpeakers representing the applicant said the rapid growth of Caversham warranted the need for a service station, while the increased setbacks and added vegetative screening would take care of the amenity concerns.
Council disagreed with the applicants, and majority voted to support a motion from Cr David Lucas to refuse the roadhouse due to its potential adverse impact on residential lots and the rural amenity.
A review has been programmed for a SAT hearing on July 22.