The party referendum results, announced early on Monday, deal a huge political blow to the Israeli prime minister. About 40% of the Likud's members turned out for the crucial vote.
A total of 59.5% of the Likud members who cast a vote on Sunday rejected the scheme, according to the official results announced on public radio.
Just 39.7% of the 96,700 Likud members who voted backed Sharon's scheme, providing him with a major political headache despite an earlier statement that he would press on with the plan regardless of the vote result.
The rejection by his party of the plan he spent much of the past several months promoting, is one of the most serious setbacks Sharon has suffered since taking office as prime minister in March 2001.
The centrepiece of his US-backed "disengagement" plan is a withdrawal of most troops and the removal of all 21 Jewish settlements from the Gaza Strip.
Currently about 8000 Jewish settlers live in the Gaza Strip along with 1.5 million Palestinians.
To be considered
In a statement issued by his office, Sharon promised to "respect" the outcome of the vote, but did not elaborate on how that would materialise.
"I will consult the ministers, the Likud and the coalition parties in the coming days to hold in-depth discussions on the consequences of this vote," he added.
The West Bank settlement of
Ganim was one of four to go
Observers said the vote was directly influenced by a day of bloodshed, notably the killing of a settler woman and her four young daughters in the Gaza Strip.
The US voiced the hope that Sharon would none the less go ahead with his plan to unilaterally withdraw from Gaza.
US still supportive
"Our own view has not changed: The president welcomed Prime Minister Sharon's plan to withdraw settlements from Gaza and a part of the West Bank as a courageous and important step toward peace," the White House said in a statement.
Justice Minister Tommy Lapid, of the secular Shinui party, deplored the referendum result.
"This is the victory of a small group of extremists," he said. "I was dreaming of a coalition with Labour, Likud and Shinui. Now this dream could be history."
But Deputy Prime Minister Ehud Olmert said a unilateral withdrawal from the Gaza Strip remained Israel's "only option".
The prime minister had warned earlier he considered the referendum chiefly a "moral duty" - not legally required or binding - and that he would press on with the Gaza withdrawal even if Likud members voted it down.
But his defeat was likely to shatter the fragile government coalition and Sharon could be forced to seek the general public's endorsement of his plan or submit it only to the cabinet.
"I will consult the ministers, the Likud
and the coalition parties in the coming days to hold in-depth discussions on the consequences
of this vote"
Israeli prime minister
Few commentators expected the hard-nosed prime minister to resign, but the Labour-led opposition demanded early elections.
Sharon had stressed Israelis needed to realise that the whole of biblical Palestine could not be under Israeli control without incurring a huge human, financial and political cost.
But settlers and members of the nationalist right-wing have accused Sharon - the architect of Israel's settlement policy over decades - of "letting his children down".
The Palestinian Authority was swift to urge Sharon to resume negotiations following the rejection of his plan, which he claimed he had to draw up in the absence of a suitable negotiating partner on the Palestinian side.
"After this failure, the Israeli government should immediately resume negotiations with the representatives of the Palestinian people in order to seriously implement the road map," Palestinian leader Yasir Arafat's top adviser Nabil Abu Rudaina said.
Arafat insists Israel should
now focus on the road map
He was referring to an internationally drafted peace blueprint which was approved by both sides last year, but which Sharon recently declared dead.
For his part, Palestinian negotiations minister Saib Uraiqat predicted that the humiliating defeat suffered by Sharon could prompt him to scale down his withdrawal from the flashpoint Gaza Strip.
"After this defeat, Sharon could announce that he will relinquish only some parts of the Gaza Strip and withdraw partially from the territory, not completely," he said.