United States ambassador Woody Johnson insisted the balloon was not a fair representation of British views.
President Donald Trump and his wife Melania are due to arrive in Scotland tomorrow night before meeting the Queen at Windsor Castle.
Mr Trump and the Queen will watch the Guard of Honour parade past before having tea with the First Lady.
They each have 4,000 square feet of floor space, including a Presidential suite with a large office and conference room, a medical suite that can be used as an operating room and two kitchen areas that can feed 100 people at a time.
The organizers claim that flying the balloon is their right "pursuant to the rights of Freedom of Assembly and of Association", as well as the right to protest peacefully.
"With that in mind, and on this occasion, we are unable to grant permission for the balloon to fly in that area however, we are in discussion with the applicants about possible alternatives".
The Beast is a seven-seat black limousine which is created to give Mr Trump the ultimate protection.
The president has at his side at all times a White House doctor and one of five rotating military aides who carry the nuclear "football" - equipped with communication tools and a book with prepared war plans.
An inflatable, baby version of President Donald Trump could be appearing over his golf course in Scotland this weekend.
"If Trump truly wanted to emulate Churchill, he would celebrate the peace and prosperity of Europe and seek to strengthen rather than destroy trans-Atlantic ties", said Amanda Sloat, a senior fellow at the Brookings Institution and a former State Department official in the Obama administration. That prompted almost half a million people to sign a petition calling for Trump to be banned from the UK.
Hundreds of officers were to stay in cramped lines of camp beds filling a vast gymnasium and sleeping mats on the floor of squash courts between long shifts policing the USA president's trip.
A YouGov poll this week found that the president's favourability rating in the United Kingdom is minus 60, significantly worse than both George W Bush and Barack Obama.