"The project currently on the table does not fit in with its envisaged surroundings," invited resident Lina van Beest told the Amsterdam Centre council before the majority vote requesting further consultations.
The five-million-euro (6.8-million-dollar) monument is a project of the Dutch Auschwitz Committee that hopes to display the names of 102,000 Jews and 220 members of the Sinti community deported to Nazi death camps during World War II.
The "Path of Light" memorial is designed by Libeskind, master-planner of the new World Trade Centre's reconstruction in New York's Lower Manhattan and the Jewish Museum in Berlin.
"It's a good idea in itself, but it makes no sense building it here. The park's just too small," local resident Marja Ham told AFP.
The 1,000-square-metre (11,000-square-foot) monument is planned to be built in 2015 in Amsterdam's central 7,500-square metre Wertheim Park, in an old Jewish neighbourhood, near the Jewish Museum and the Portuguese synagogue.
Residents have complained that the monument will take up too much space in the popular park, which already has a monument to the victims of the Nazi concentration camp at Auschwitz, and they are worried about the impact of the expected 200,000 annual visitors.
Residents said they were handed a done deal after the council in March signed a preliminary agreement to support the project without having properly consulted them.
The council voted that a new agreement in principle be drawn up given residents' complaints, including looking at other possible locations for the monument.
"This is an important monument and it shouldn't be built in hostile surroundings," said council head Boudewijn Oranje.