The government's decision to reject plans for a single authority in Cumbria is a "golden opportunity missed", according to the county council.
The county council will look at the reasons behind the bid's rejection
If approved, a unitary council would have meant the abolition of the county's six district authorities.
The districts, which said a county-wide authority would be too unwieldy, welcomed the announcement.
Unitary schemes in Northumberland and Durham have been endorsed and will be created in April 2009.
In March, Cumbria County Council's unitary bid was shortlisted by the Department of Communities and Local Government.
At the time a council spokesman said its proposal was among the three highest rated out of 16 bids submitted across England.
Following Wednesday's decision, county council leader Tim Stoddard said: "Change still needs to happen in the way councils work and the county council will lead the way in making that change happen.
"We're obviously disappointed that our proposal has not been accepted and we see it as a golden opportunity missed.
"We will be looking closely at the reasons why the Department for Communities and Local Government has not accepted our bid."
Allerdale, Barrow, Carlisle, Copeland, Eden and South Lakeland councils had claimed the creation of a unitary authority would reduce services to residents, stifle democracy and drive up council tax bills.
South Lakeland Council leader Brendan Jameson said: "The people of Cumbria are the winners from this decision and I will be thanking the minister for listening to the representations made by all the district councils who lobbied tirelessly on behalf of the local community.
"If this plan had gone ahead it would have created a multi-million pound white elephant that no-one wanted, and would have impacted on every single resident in the county in some way or another."