"It was basically a safety issue," said chief administrative officer Ian Fremantle. "This person's driving around the general public."
He said he did not feel comfortable making the decision himself and approached city council, which voted six to one against approving the license.
But Pai-Pa taxi general manager Craig Dunphy feels the city is being unfair.
"He's trying to turn his life around with a fresh clean start in a new town and they're saying 'you can't work here,'" said Dunphy, adding the man is a member of Alcoholics Anonymous and no longer drinks.
The driver's criminal record was not included on his original application, which is something Dunphy feels may have caused a problem.
He said the man, whose first language is French, misunderstood part of a new taxi bylaw, Dunphy said.
Included in the rules is a clause stating taxi license applicants cannot have been convicted of a criminal offence within the last five years.
Dunphy said the man read the bylaw and thought he did not have to declare his impaired driving convictions because they were outside the five-year window.
But applicants must also sign another bylaw form stating that information provided concerning their criminal record is complete.
There have been three people killed in Iqaluit by municipal vehicles within the last two years.