The 316-37 vote will be a relief to scientists pursuing research into therapeutic cloning, but a disappointment for those who completely oppose work on human embryos.
The parliamentary issue came up on the same day as Germany's national ethics committee decided to recommend allowing the import of human stem cells from abroad under clear supervision.
In Britain, emergency legislation could become law next week which would ban embryo clones from being implanted into wombs but would not ban therapeutic cloning (using cell nuclear replacement to develop new transplant therapies).
Any European ban would have been symbolic, in that it is up to individual states to decide their policy, but could have been significant in future funding debates.
No state intends allowing a human baby to be produced by cloning.
Intensified debate
The Italian MEP who moved the failed resolution is now urging new legislation.
"There is a shared will not to drop this... it is such an important matter," Francesco Fiori said.
The debate about therapeutic cloning has intensified after a US commercial laboratory published details of a human embryo clone earlier in the week.
Scientists who want to carry out therapeutic cloning are aiming to find treatments for degenerative diseases like Alzheimer's, Huntington's, Parkinson's, motor neurone disease and multiple sclerosis.
They want to use the embryos to produce stem cells. Stem cells are interesting for scientists because they have the potential to grow into many different kinds of cells.
Alternative avenues
The hope is that stem cells can be induced to form new cells which could then be transplanted for medical purposes.
Human stem cells can be obtained from human embryos before they have developed to more than a tiny bundle of cells, or they can be obtained from adults.
Opponents of research on embryos say that the destruction of an embryo, at however early a stage, is immoral, and that cells from adults should be used instead.
Defenders of the research say not enough is known about how to work with cells from adults, and that embryonic cells are needed to fill in the gaps in our very limited knowledge of how stem cells work.
Cloning, they argue, also offers the potential for "perfect-match" tissue - cells that would not be rejected by a patient's immune system after they are transplanted.
German compromise
The decision by Germany's national ethics committee to back stem cell imports was taken by a small majority.
Fourteen of the committee's 25 members voted to back the imports.
The creation by cloning of human embryos for therapeutic research is illegal in Germany but if the government follows the committee's recommendation, researchers will be able to import existing cell lines grown from embryos outside the country.
Several such cell lines already exist.
British legislators have also grappled with the moral issues surrounding stem cell research.
Royal Assent
The two-clause Human Reproductive Cloning Bill was backed by MPs despite strong cross-party complaints about the speed with which ministers were moving.
It completed its Lords stages in just a day on Monday, and now looks set to receive Royal Assent on 4 December.
A High Court ruling earlier in November meant the government's policy of banning reproductive cloning but allowing therapeutic cloning actually had no legal effect.
The swift move to restore the legal basis of government policy has run in to criticism from anti-abortion campaigners, who want to reopen the debate and ban all cloning.