Despite opposition from dealers, residents and the local council, the owners of The Mall, the retail property investment company London & Associated Properties (LAP), have now been granted permission to remove the traders' internal units before handing the property over to the fashion chain Jack Wills.
Mike Weedon, from the Camden Passage Association, said: "It only shows once again that you can't beat big business. We're bitterly disappointed, and this decision goes entirely against the will of the people."
He added: "Fortunately all the dealers who were in The Mall have all found new homes."
In making his decision, the Government Inspector described the antique shops in The Mall as "rather crudely executed" and said that the architectural interest of the building would "not be unacceptably affected by the loss of these features".
But Islington Council's deputy leader, Terry Stacy, said: "This was a spectacularly bad decision by the Government Inspector. I'm shocked and appalled that he could walk in and dismiss this much-loved and unique arcade as being of no interest."
Local ward councillor Emily Fieran-Reed said: "It's really sad that an inspector appointed by the Government in Whitehall gets to override the wishes of local people. It feels like local decisions are being trampled over.
"This was a famous antiques arcade that brought people to Angel and Camden Passage. It's been there for four decades, so it's a sad loss for our local area. The Government Inspector has really let us all down."
As well as The Mall, LAP are the owners of the Chelsea antiques centre Antiquarius, where they have reapplied for planning permission to turn it into a flagship store for the American retail chain Anthropologie.