Inquiry into towering hotel stalls
The move came hours after Unesco inspectors visited Holyrood to investigate the capital's World Heritage status and view prominent development sites.
The 17-storey complex, compared by critics to an "alien spaceship from Dr Who", will be the subject of a public inquiry, stalling the start of work for up to 18 months.
Ministers say they have called it in to examine concerns that the scale of the building will damage the city's skyline and be out of keeping with the Haymarket area.
Leading hotel chain InterContinental had been set to run the five-star hotel at the heart of the 200 million development.
Councillors backed the project at the first time of asking in June, but the Scottish Government had to be asked to approve it because the council previously owned the site.
The Irish developer, Tiger, wants to replace the car park at Morrison Street with a five-star hotel, a three-star hotel, offices, shops and restaurants, creating 1,700 jobs.
Critics include Edinburgh World Heritage, Architecture and Design Scotland and the Cockburn Association.
John Nesbitt, the managing director of Tiger, last night said: "We are naturally disappointed that there will be a further delay in starting work on a project which has received the backing of the council's planning committee and a lot of public support."
The call-in decision is a huge blow for the city council, which has been accused of rushing through the development.
An inquiry into the Haymarket plan had been thought unlikely after John Swinney, the finance secretary, told business leaders in August that he saw no grounds for concern over any developments recently approved by the council.
However, a spokesman for the Scottish Government said yesterday that there was justification for a public inquiry. He added: "Scottish ministers have given this direction to enable consideration and decision at a national level, in respect of the merits and potential impacts of the proposed development on this prominent gateway to the centre of Scotland's capital city and on the city's skyline."