The resolution called for sanctions on Mugabe and 13 other officials
Britain and the US have condemned Russia and China for vetoing a draft UN Security Council resolution to impose sanctions on Zimbabwe's leaders.
UK Foreign Secretary David Miliband said the veto was incomprehensible. The US said it brought into question Russia's reliability as a G8 partner.
Zimbabwe and its main ally South Africa welcomed the result.
Russia and China defended their stance, saying the situation in Zimbabwe posed no threat to international stability.
The proposed measures had included an arms embargo and a travel ban for President Robert Mugabe and 13 of his key allies.
Zimbabwe's Information Minister Sikhanyiso Ndlovu described the resolution as a Western plot and welcomed its rejection.
"We are happy that the United Nations principle of non-interference with member states of the United Nations has been brought to the understanding of the whole world," he said.
"Russia and China have only observed the principles of the United Nations. We... would like to thank those who helped defeat international racism disguised as multilateral action at the UN."
There has been growing international criticism of Zimbabwe since the re-election of Mr Mugabe in a run-off boycotted by the opposition.
The opposition's Morgan Tsvangirai and his Movement for Democratic Change party say they had faced a campaign of violence by Mugabe supporters, which left dozens dead and thousands injured and forced from their homes.
Russia and China said they opposed the resolution because the situation in Zimbabwe did not threaten international stability.
UK ambassador says the Security Council has failed Zimbabwe's people
The US ambassador to the UN, Zalmay Khalilzad, said Russia's veto raised "questions about its reliability as a G8 partner".
Mr Miliband said Moscow and Beijing had sent mixed signals about their intentions - with Russia using its veto despite a promise by President Dmitry Medvedev to support the resolution when it was discussed at this week's summit of the G8 group of industrialised nations.
"The vote yesterday showed that, in the end, the Russians and the Chinese - I wouldn't quite say put two fingers up - but effectively they blocked action," he told the BBC, adding that Britain would be keeping up its pressure.
The resolution had the support of nine council members, the minimum required to pass in the 15-member council.
But the veto of any of the five permanent members - which include Russia and China - is enough to defeat a resolution.
A BBC correspondent at the UN, Andy Gallacher, says the failure of the resolution is a major blow for the United States and Britain.
The UK ambassador to the UN said after the vote that the UN had failed in its duty to offer the people of Zimbabwe some hope.
UN SANCTIONS VOTE
FOR Belgium Burkina Faso Costa Rica Croatia France Italy Panama UK United States
However, Russia's ambassador Vitaly Churkin said sanctions would have taken the UN beyond its mandate.
China's Foreign Ministry's chief spokesman Liu Jianchao said sanctions would complicate conditions in Zimbabwe and would not help to encourage the various factions engage in political dialogue and negotiations.
South Africa - which is hoping that President Mugabe and the opposition can reach a deal on a power-sharing - voted against sanctions, leading to accusations from the US that it was protecting Mr Mugabe.
But South Africa's representative, Dumisani Kumalo, said sanctions would interfere with dialogue that would lead to improvements in the humanitarian and economic situation.
Violence in Zimbabwe is said to have increased after the disputed presidential elections.
The MDC's Morgan Tsvangirai won the first round of Zimbabwe's presidential elections on 29 March, but official results gave him less than the 50% share needed to avoid a run-off.
He pulled out of the run-off poll after many of his supporters were targeted, assaulted and even killed, leaving Mr Mugabe to win unopposed in the second round at the end of June.
The MDC says 113 of its supporters have been killed, some 5,000 are missing and more than 200,000 have been forced from their homes since March.
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