"After considering the Traveston Dam proposal and the best available scientific evidence and other material ... it is my intention to say no to the Traveston Dam," Mr Garrett told reporters in Brisbane on Wednesday.
"It is clear to me that the Traveston Dam cannot go ahead without unacceptable impacts on matters of national environmental significance."
Mr Garrett's interim decision triggers a 10-day consultation process during which the dam's proponent, the Queensland government, and other federal ministers can comment and provide further evidence to support their views to dam the Mary River in southeast Queensland.
Mr Garrett will then announce a final decision on November 25.
Mr Garrett said although the dam was in Queensland, the decision was of national significance.
"In particular the project would have serious and irreversible effects on national listed species such as the Australia Lungfish, the Mary River Turtle and the Mary River Cod - both of those endangered.
"And the adverse effects would contribute to the further decline of the species.
"Any possible economic or social benefit are likely to be outweighed by the unacceptable impact on listed threatened species."
There has been massive public interest and many submissions made to the government and department, he said.
Premier Anna Bligh earlier told state parliament the dam was "absolutely critical" for the future of the fast-growing region.
"We are the fastest growing region in Australia and the people who are moving here need to drink water, their families need water to bathe, the industries that employ them need water to operate," Ms Bligh said.
The alternative to the dam is at least two desalination plants, at a significant extra cost to taxpayers.
Glenda Pickersgill from the Save the Mary River Coordinating Group they are very encouraged by the minister's decision but it was important to remember it was only a "proposed" decision.
"We are confident of the science and there are much better alternatives to damming the river," Ms Pickersgill said.
"We are confident in the science and we'd be urging Minister Garrett to look to the outcomes of Paradise Dam, to take them into consideration in his decision."
She called on Mr Garrett to release the full advice from his department and give opponents a 10-day public submission period.
"In the light of the Rudd Labor government being open and transparent we believe that we should have that option.
"We will continue to follow the science."
