The measure, an amendment to the foreign aid bill for fiscal 2005, would have reclassified $570 million dollars in aid to Egypt from military to economic.
Proposed by Democratic Representative for California Tom Lantos, the amendment was rejected on Wednesday by a 287 to 131 vote, according to congressional records.
Lantos is the ranking Democrat on the House International Relations Committee. Earlier this week, he accused Cairo of stockpiling arms and over-exaggerating the military threat of neighbouring Israel, Washington's chief recipient of US military aid.
Egypt is only second to Israel as a recipient of US aid. Israel receives $3 billion a year - $1.2 billion in economic aid and $1.8 billion in military aid.
US Secretary of State Colin Powell wrote to Congress saying the amendment would weaken balanced military aid to Egypt and Israel, adding that US credibility "depends to a great degree upon being a reliable provider of assistance to the Egyptian military," according to The Washington Post.
Powell and senior lawmakers from both parties also stressed that cutting military aid to Cairo would send the wrong signal at a time when Egypt has started working with Israel to assure a smooth transition, as Israel plans to implement its unilateral pullout plan from the occupied Gaza Strip.
Allies Egyptian President Husni
Mubarak (L) with Bush
The $19.4 billion foreign aid bill for fiscal 2005 - beginning 1 October - was passed by a 365 to 41 vote.
Egypt has been a major non-NATO ally of the United States since 1996.
The US Defence Department was also reportedly unhappy with Cairo's refusal to support the US military buildup in the Gulf in preparation for the war against Iraq.
The programme which US leaders had objected to - Horseman without a Horse -was loosely based on The Protocols of the Elders of Zion, a controversial document that has never been corroborated.
It was broadcast last Ramadan, the holy Muslim month of fasting, in Egypt and on 22 Arab television stations.
It depicted the story of an Egyptian man fighting British imperialism and Zionism in the 19th and early 20th centuries.
The US State Department was among the show's critics and urged the Arab world not to air the series.
"... As Americans, we are paying literally billions of dollars to this hateful regime and to sponsor this hateful television series"
Former US presidential candidate
Christina Rossetti, who tried to run for the 2004 presidential seat under the Green party banner, posted a petition on the internet also calling for a complete termination of aid to Egypt because of the series.
However, her call garnered a total of 36 signatures only.
"As Americans, we are monetarily supporting a repressive Egyptian regime, which cynically uses this hate-mongering show to deflect criticism from that regime. As Americans, we are paying literally billions of dollars to this hateful regime and to sponsor this hateful television series," she wrote on the petition.
Rossetti also ran for Congress in New York.
However, Rossetti is a firm supporter of aid to Israel. She has severely criticised fellow Green party candidates who ran on a platform of divesting all money from Israel.
"No mention was even made of divesting money from Yasir Arafat who is a well-known terrorist and has used American funds to fund suicide/homicide bombings," she wrote last year on an online question and answer forum.
US legislators calls
Previous accusations of anti-Semitism in the Egyptian media have also prompted calls by other US lawmakers to cut aid to Cairo.
In 2001, Senator Mitch McConnell, a Kentucky Republican, criticised the Egyptian government for what he claimed was the anti-Semitic attitude of the newspapers it finances.
"In Egypt, government-sponsored newspapers praise Adolf Hitler and incite violence against Jews in Israel. I'm wondering if this kind of behavior warrants a request of $2 billion," he told a Congressional committee.