The province will not be moving forward with the site at 21375 Lougheed Highway in Maple Ridge for supportive housing.
It has been deemed not suitable for a permanent supportive housing facility.
The city purchased the site adjacent to the Maple Ridge cemetery in August.
Discussions will take place with the city on alternate uses for the site, such as affordable housing for seniors or families, according to the province.
In March, the province bailed on another proposed location for supportive housing for the homeless, deciding not buy and renovate the Quality Inn after a large public rally and several petitions against that plan.
Residents and businesses also protested the 21375 Lougheed Highway location, which is next to a daycare and veterinary hospital.
The B.C. government has now presented a four-point plan to the City of Maple Ridge to help address homelessness in the community.
It includes closing of the temporary shelter in downtown Maple Ridge and relocating clients "once an appropriate location is identified."
The province will work with RainCity Housing to implement immediate improvements to the operation of the temporary shelter.
Local Liberal MLAs Doug Bing and Marc Dalton will also host a community meeting in late January to hear from Maple Ridge residents on a number of issues, including appropriate locations for both temporary and long-term supportive housing facilities.
"Our goal is to reach a solution that benefits everyone and provides opportunities and assistance to those who need our help," said Rich Coleman, Minister of Natural Gas Development and Minister Responsible for Housing.
"I'm glad to see that a decision has been reached that will allow us to move forward with an alternative option that will be in the best interests of all Maple Ridge residents," Bing added.
"I look forward to hearing more from our community regarding the path forward and will continue to work hard to represent the interests of Maple Ridge," Dalton said.
The temporary shelter opened in fall 2015 after a voluntary clearing of the homeless camp on Cliff Avenue.
It was to close in March of this year, but has twice been extended.