Istanbul's Olympic bid leader said a chance had been missed to help global peace after the Turkish city was rejected for the 2012 Games.
Istanbul, Havana, Rio de Janeiro and Leipzig were dropped from an initial shortlist of nine.
"A unique opportunity to stage the Games for the first time in a country with a predominantly Muslim population is turned down," said Yalcin Aksoy.
"(We offered) a legacy of enhancing understanding and peace through sport."
Istanbul finished eighth out of the nine cities in a league table of applicants.
"Only three years ago Istanbul was accepted as a candidate city for the 2008 Games - and not now?" added Aksoy.
"Were there any negative developments? No. On the contrary.
"The country had overcome the financial crisis of the year 2000 and the 80,000-seat Ataturk Olympic Stadium was constructed and inaugurated in 2002."
Havana was the only city to finish below Istanbul.
And Cuban Olympic Committee president Jose Ramon Fernandez claimed the decision was a triumph for commercialism over sport.
"This decision was based on infrastructure, big hotels, television, advertising. We insist that it should be based on sport and not commerce," said Fernandez.
"Havana will continue maintaining that athletic merit and organizational capability should be the main factors for hosting the Olympic Games."
Brazilian Olympic Committee (COB) technical director Marcus Vinicius Freire said the exclusion of Rio de Janeiro had come as a major shock.
"Nobody expected this," he said. "This was a monstrous surprise for us. It wasn't just a bucket of cold water, it was a complete shower.
"Brazil had a very well-designed project and we didn't expect this at all."
Freire added: "I'm convinced these Games will be in Europe, which opens the doors for the 2016 Games to be in South America."
In Leipzig, a crowd of more than 10,000 people, who had gathered to watch the announcement on a giant television screen, were stunned into near silence.
"I didn't expect this. It's hard most of all for the people who live here," said Wieland Schmidt, a handball Olympic gold medallist from 1980.
"I don't understand the IOC. They say they want to get away from gigantic and then they don't use this chance with Leipzig."
Leipzig, which has a 500,000 population, hoped its size would work in its favour as the IOC has expressed a desire to see the Games concentrated in a smaller area.
"It was decided that the Olympics was one size too large for Leipzig," said Thomas Bach, the German vice president of the IOC.
The five cities who will compete for the right to host the 2012 Games are New York, Madrid, Paris, London and Moscow.
PROPOSED 2012 DATES
London: Jul 27-Aug 12
Madrid: Aug 10-25
Moscow: Jul 14-29
New York: Jul 27-Aug 12
Paris: Jul 20-Aug 5
New York bid chief Daniel Doctoroff was thrilled at making the shortlist.
"New York's designation puts us in select company with the other great candidate cities on the road to 2012," he said.
Doctoroff said New York uniquely reflected the Olympic values.
"(In those values) individuals from every corner of the world and all walks of life come together, transcend their differences and engage in fair and friendly competition to achieve their dreams."
Paris were said to have been overconfident during their failed bid for the 2008 Olympics.
Bid leader Philippe Baudillon said: "Our experience with previous bids has taught us a great deal about the needs and aspirations of the IOC.
"We firmly believe that Paris will meet those needs."
Baudillon added: "This marks the point where the race gets serious."
Madrid is the only major European capital which has never hosted the Olympics, though Barcelona staged the 1992 Games.
"We have been placed on the same level as major cities," Madrid Mayor Alberto Ruiz Gallardon said.
"From now on we are going to have to be more demanding with ourselves."
Moscow Mayor Yuri Luzhkov said the Russian capital was a "risk-free choice for 2012", although the IOC said it was "less certain" about Moscow's credentials than the other four cities.
"The IOC's message was clear. Only those cities which could deliver the best possible games have survived. It was a true sporting principle," said Russia's Olympic chief Leonid Tyagachyov.
"We have a lot of work ahead of us. We are really committed to show the world that Moscow could stage the best Olympics of all the remaining candidates."