Zack Diarra, the owner of Timbuktu Fashions on Brentwood Road in Northeast, had been "scared to death" of Wal-Mart, worried the nation's biggest retailer would undercut his clothing prices and wipe out his eight-month-old business.

Not anymore. The chain on Friday yanked plans to build its first District store in the Rhode Island Place shopping center in Northeast. "I am incredibly happy," Diarra, 36, said after hearing the news.

Anabel Perez isn't. The 19-year-old mother of two, who works at Brentwood Cleaners across the street, is tired of driving into Maryland to find bargains on diapers at Wal-Mart. "I really wanted it to open here," she said.

Wal-Mart Stores Inc.'s decision to cancel plans for a Brentwood store triggered a mix of disappointment and relief in the neighborhood surrounding the proposed site, exposing the same kind of deep fault lines that have dogged Wal-Mart's expansion across the country.

For nearby small businesses selling products that overlap with the retail behemoth, Wal-Mart represented a potentially grave threat; for residents, it represented broader shopping options than the dollar shops and convenience stores that now dot the area, and the shot at hundreds of new jobs.

Bentonville, Ark.-based Wal-Mart, the nation's largest retailer, had reached the final stages of negotiations to build a 100,000-square-foot store in Brentwood, a plan city leaders had endorsed in an effort to revive business in the neighborhood.

But after touring the shopping center late last week, senior executives at the company rejected the proposed site, saying it did not meet their "operational requirements." They have vowed to look for a new store site in the District.

Developers familiar with the negotiations said the company was unsatisfied with the small store site and parking lot in the complex, which already holds a Giant Food and Home Depot.

"Their first store in the District has to be the right store and this was not it," said a person familiar with the talks, who spoke on condition of anonymity because he is not authorized to discuss the deal.

It is unclear what will fill the vacant site, which developers have at various times marketed to Kmart, Kohls and Marshall's. The city, which originally owned the land, sold it to private developers in 2001.

Chris Bender, a spokesman for the city's office of economic planning and development, called the lot " the retail equivalent of beach-front property" with proximity to the Rhode Island Avenue metro stop and bustling Rhode Island Avenue, and he predicted other retailers would be interested in it.

Wal-Mart's decision will avert a showdown with neighborhood and activists groups, who had quickly mobilized against a store in the District.

Twelve groups had signed a letter asking the mayor and the city council to halt Wal-Mart's negotiations for the Brentwood site. They had argued the chain would pay city residents low wages and benefits, destroy small businesses and overwhelm the surrounding neighborhood with traffic.

Even after the deal fell apart, several of those groups criticized the city government for what they said was too little communication with residents of the Brentwood and Brookland neighborhoods about the proposed Wal-Mart.

"There is no dialogue going on about this development and the residents have a right to know what will happen on the site," said Ray McInerney, political director for the 150,000-member Metropolitan Washington Council of the AFL-CIO, which represents 175 local unions.

Last week, before Wal-Mart pulled out, a spokeswoman for the mayor, Sharon Gang, explained why Williams was supporting the development of the site. "If a Wal-Mart was put into Prince George's or Fairfax counties, people would leave to shop there. The mayor's feeling is that we should bring business to the District."

The unraveling of the Brentwood deal appears to have revived interest in the site from Manna Community Development Corp., a nonprofit group that works to develop long-depressed D.C. neighborhoods.

The group had backed out of a development team on the site when it learned discussions were underway with Wal-Mart, which it has called "immoral." But Manna executive director Dominic Moulden said over the weekend that he would seek to begin working with developers to find a new retailer to fill the site.

Back in Brentwood, some residents urged Wal-Mart to reconsider. For Sheldon Giles, an unemployed Brentwood resident, a Wal-Mart in Brentwood would have translated into a job application after months of scanning the want ads. "Now I'll just wait for something else," he said.

Others said Wal-Mart would have made shopping more convenient. Last week, before Wal-Mart pulled out, 44-year-old Ronald Williams said the area needed a large store. He pointed with dismay at the retail around him -- a pawn shop, a small women's fashion boutique and beauty supply store.

"I'm sick of going to Maryland to buy things," he said, describing frequent pilgrimages to discount stores in Montgomery and Prince George's counties to supply his three grandchildren with back-to-school clothes. "We should have a Wal-Mart here. It would save me the trip."

City leaders point out that national retailers have had a number of successes in Brentwood. Home Depot and Giant Food, both of which opened in the past five years, have performed better than expected. National Wholesale Liquidators and Safeway anchor another shopping center nearby.

Like Williams, Cheryl-Lee Scott has no car and welcomed a Wal-Mart. When she wants to buy a large fan to battle the summer heat or replace a frying pan to cook her favorite meals, she hops on a bus into the suburbs.

"We don't have anything here," she said, sitting at a bus stop.

Zack Diarra, owner of Timbuktu Fashions, was "incredibly happy" when he heard the news.Wal-Mart would have been in a Brentwood complex that already has a Home Depot, above, and a Giant grocery store.