Westmeath County Council initially granted permission for the development last year.
An Bord Pleanála says location and scale are the main factors in rejecting an application for a second Lidl store in Athlone.
Westmeath County Council initially granted permission for the development in July last year.
However in its appeal decision, ABP noted that the Baylough location would contravene the overall retail strategy of the town.
It also raised concerns about the design of the shop and it's ability to fit in with the urban areas surrounding it.