Despite allegations that such contractors were involved in abuse at Abu Ghraib prison in Iraq, the Senate on Wednesday rejected the Democrat amendment 54 votes to 43.
The failed amendment had pushed for a halt to the use of contract interrogators within 90 days and contract translators within a year.
Democrats said stopping the use of contractors in interrogations would give the Pentagon more accountability for its prisons and help prevent future abuses in the wake of the scandal over the beating and humiliation of detainees.
Senator Christopher Dodd said contractors "may have played a significant role" in the abuses, "and it remains unclear whether these individuals will ever be held accountable for their actions".
But Republicans said the measure would devastate intelligence operations in Iraq, Afghanistan and the US naval base at Guantanamo Bay where a number of interrogations are directed or conducted by non-government agencies.
Armed Services Committee Chairman John Warner said it was "not the time to put a 90-day jackhammer that severs our ability to continue our interrogation of prisoners with the use of contractors".
However, the Senate did agree unanimously to make Defence Secretary Donald Rumsfeld issue guidelines to ensure treatment of prisoners meets standards of the US Constitution and international agreements.
President George Bush has maintained his policies adhered to the Geneva Conventions on the treatment of war prisoners.
But disclosures of classified memos have shown that administration lawyers argue US and international laws banning torture do not restrict the president on the way he ordered interrogations.