In the year Scotland holds an independence reference, the group had been hoping to put up a memorial near Glasgow Cathedral to mark a battle with the English in the 13th century.
But the city council has refused to allow them to use a piece of its land at the rear of Provand's Lordship.
The Society Of William Wallace has already commissioned a work to commemorate the Battle of the Bell o' the Brae on a steep slope where High Street and Rottenrow meet. The battle is believed to have happened about 1300.
Members, who have already spent about £1200 on the project, heard of the decision in a letter from Stevie Scott, the city parks and open spaces manager.
It says: "At this stage, I have taken the decision to refuse permission for the use of our land.
"I have taken this decision at this time to allow my service the opportunity to review all monuments and statues across the city's parks and public domain spaces to determine their current condition.
"I expect this exercise to commence post the 2014 Games period and would hope to be in a position to reconsider your request nearer the end of the calendar year.
"Thank you for your interest in this location and please do keep in touch with regards to this excellent idea."
However, the Society Of William Wallace was keen to have the memorial in place in time to mark the 700th anniversary of Robert The Bruce's famous victory at the Battle Of Bannockburn on June 24, 1314 and in advance of the Commonwealth Games.
Society vice-convener Gary Stewart, an accounts manager, said the group had several conversations with city planners and were told there would be no problem erecting the monument.
He said: "We have been working on this for six years and a lot of time, effort and money has gone into it.
"I felt we had got to the final hurdle and wanted it in place before the 700th anniversary of Bannockburn.
"I would be devastated if that did not happen."
A council spokesman said: "We will not be able to consider this request until the end of the year after we have carried out a review of all statues and monuments for which we have responsibility.
"In the past, we have inherited responsibility for, and the costs of, maintaining statues created by other organisations."
But the Society Of William Wallace insists it will maintain the Battle of the Bell o' the Brae monument and there will be no cost to the council.
Mr Stewart said: "Part of the deal in Glasgow is that we will look after the new monument and will also market it to our friends in America, who will flock to see it.
"There will be no cost to the council."
Kelvin MSP Sandra White has called on the city council to allow the monument to be erected.
She said: "It will not cost the council a penny but would bring more tourists to Glasgow."