The news is a hammer blow to Dudley Council. It has been involved in months of delicate negotiations with the DMA over Hall Street, which has attracted huge protests.
The authority claimed in May the DMA had agreed to ditch the scheme in favour of a scaled down proposal in Castle Hill.
The Castle Hill proposal was later ruled out sparking a fresh search for new sites.
Mr Ahmed said today: “We have no choice but to go ahead and make a full planning application for Hall Street.
“I’m very disappointed the council have not been able to come up with a viable alternative which would have resolved the issue.
“We have reached the stage where it’s all systems go. Once we start investing money and commit a budget to making the full application, it will be the point of no return.”
Mr Ahmed added architects would be instructed “within weeks” while detailed plans would be submitted “in months”.
The council rejected initial plans for the Hall Street mosque and community centre but they were granted on appeal.
A High Court judge upheld the appeal decision. Two petitions against the plan drew more than 50,000 signatures with residents saying the building would be out of keeping with Dudley’s medieval character.