Hong Kong's leader has said the rejection of his plans for electoral reform means the territory has lost a "significant step" towards democracy.
Donald Tsang said the rejection of his proposals was "regrettable"
Pro-democracy legislators voted against Chief Executive Donald Tsang's plans on the grounds they did not go far enough.
The reforms would have changed the way the territory's leader and legislative council were elected - but would not have introduced universal suffrage.
Mr Tsang said he would not now offer an alternative before elections in 2007.
Speaking at a late-night news conference after Wednesday's vote, Hong Kong's new leader called the result "regrettable" and warned of a serious split over constitutional reform.
"I had hoped for an early Christmas present on democratic development from our Legislative Council members," he said.
"I do believe that we have lost an opportunity to take a significant step on the road to democracy."
Pro-democracy legislators rejected his proposals because they did not consider them ambitious enough.
"In this era of democracy, we do not see how Hong Kong people can be deprived of equality and one person, one vote," legislator Lee Cheuk-yan told Reuters news agency.
Tens of thousands of people marched through the territory earlier this month to demand universal suffrage.
Mr Tsang earlier said his proposals went as far as China and its allies in Hong Kong would allow.
The BBC's Hong Kong correspondent, Chris Hogg, says the pro-democracy camp's vote will probably confirm Beijing's suspicion that the democrats are untrustworthy and unpatriotic.
These are the very reasons some analysts say China is unwilling to offer people true democracy in Hong Kong, our correspondent says.
Hundreds joined a pro-democracy vigil outside the parliament building
Beijing, the analysts say, fears the democrats would win a general election and install an administration that would cause trouble both in the territory and mainland China.
For his ideas to become law, Mr Tsang needed the support of at least 40 of the Legislative Council's 60 members.
Lawmakers voted 34 for and 24 against expanding LegCo from 60 to 70 seats, with one abstention.
The proposal to double the size of the election committee also received only 34 votes, after 24 of the pro-democracy camp voted against.
Since Hong Kong's sovereignty was handed back to China by Britain in 1997, the territory has been governed under a mini-constitution known as the Basic Law.
That stipulates that the chief executive should be elected by 800 people approved by Beijing. Although it states that the eventual aim is to introduce universal suffrage, it does not give a target date.