Reverend Armstrong was forced out of Limavady in the 1980s
A clergyman forced out of Limavady in the 1980s will not be granted the freedom of the borough, after unionist councillors voted against the move.
Reverend David Armstrong left the town after a backlash from within his Presbyterian church over his decision to shake hands with a Catholic priest.
He received loyalist death threats over his Christmas message of goodwill to Catholic counterpart Fr Kevin Mullen.
The vote for the SDLP motion was 8-6, but a two-thirds majority was needed.
Fr Mullan said he was "disappointed" at the outcome.
"Neither David nor I asked for this, and when we heard about it we were honoured.
"If it had gone through it would have been momentous.
"The fact that some people have felt it's inappropriate or untimely I think is a little disappointing.
"There was an opportunity to heal a wound that had been there that had been causing hurt," he said.
The Presbyterian Moderator, the Reverend Donald Patton, said more groundwork was needed.
"I think the issue shows that we do have a lot of work to do to build understanding and trust and respect across our community.
"We've come out of a very difficult situation, and we're glad that we have put the violence by and large behind us, but we've got to work on relationships.
"Maybe the timing for this particular proposal wasn't quite right, and maybe more groundwork needed to be done," he said.
After leaving the town, Mr Armstrong retrained as an Anglican minister and is now based at a Church of Ireland parish in County Cork.