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The DCC had decided to reactivate a court process to decide the legal rights of land owners to continue quarrying on the site.
The council's primary goal was to "recognise that the skyline of the hill is important and should be protected from change", Mayor Dave Cull said.
The long-standing issue has frayed relations between land owners, the DCC and opposition group the Saddle Hill Neighbours Group.
Group spokesman Colin Mackintosh, who described the quarry as "an ulcer in the hill", said last night he was delighted with the council's decision.
"All power to them," he said.
The land where the quarry is sited is owned by the Saddle Views Estate Ltd, whose sole director is Calvin Fisher, a union official with the major shareholder, the Amalgamated Workers Union New Zealand.
Kim Taylor, Mr Fisher's representative, said last night he had no comment. He planned to release a statement in the next few days.
Cr Colin Weatherall, who has headed the mediation process for the council, said he would seek the company's co-operation "to leave the skyline untouched" while the court process unfolded.
The council has been attempting to resolve the issue of what rights the company has to take material from the quarry, but with any consent either non-existent or lost, the issue is now to be decided by an Environment Court judge.
Quarrying on Saddle Hill has attracted attention since the removal of material began in the 1950s. Council staff started investigating quarrying activities last year, and the company was asked by the council to provide evidence to support claims it could continue quarrying in the protected landscape conservation area.
In August this year, the council said it had reached an agreement over what quarrying would take place while mediation was under way.
Following a non-public discussion last week, the council yesterday announced a "successful resolution has not been achieved".
The council had originally applied to the court to "seek clarity over the extent of quarrying that can be undertaken".
The application was suspended while mediation was progressing, but the council had "considered the process to date and decided the application to the Environment Court will be reactivated".
Mr Cull said the mediation process had attempted to "find a consensual solution".
"Clearly that is not possible.
"The council is going to court to say 'please give us a ruling on this'. It is not adversarial."
The Otago Daily Times understands there was an offer for the council to buy the land, but it was not accepted.
Cr Weatherall said the area was originally under the control of the Taieri County Council, then the Silverpeaks County Council, then, since 1989, the DCC.
Staff had searched the Hocken Library, and the closest they had come to finding documents was a reference to "the consent" in an extract of Taieri council minutes.
Material from the site was used in construction of the Momona airport, and recently, council company Delta Utilities had the contract to quarry there.