At an extraordinary meeting on Wednesday, councillors voted 5-1 to delay the decision until more information was available about traffic management, security, social impacts, flooding and drainage, Tyagarah Beach access over the Easter weekend, and an unresolved agreement between Bluesfest and the Cape Byron Pistol Club.
At a public access session, councillors heard there was strong opposition to the move from parts of the community.
John Bailey, of the Byron Ratepayers Association, said residents were also concerned this was 'the thin edge of the wedge' and the site would end up being used for several events each year.
Cape Byron Pistol Club vice-president David Stebbing told the meeting the Bluesfest site was a 'fallout area' for the club, where stray bullets could land.
The club has been negotiating with Bluesfest to share the expense of installing bullet-proof baffles so that its operations can continue over the Easter weekend, but the parties have yet to come to an agreement.
Wednesday's resolution has put the onus on council staff and Bluesfest organisers to provide the extra information so that a decision can be made.
Mayor Jan Barham asked the community to acknowledge the effort Bluesfest had made, pointing out it could have gone to the Government for approval.
Update your news preferences and get the latest news delivered to your inbox.