Only 112 deputies of the 450-seat lower house of parliament backed the no-confidence motion, which needed a simple majority of 226 votes to succeed. Some 20 voted against and four abstained.
The majority of deputies, however, did not vote at all - despite expressing discontent with government policy in earlier parliamentary debates.
The Kremlin-directed United Russia faction, which has more than 300 seats in the state Duma, had sought to distance itself from the unpopular cabinet headed by Prime Minister Mikhail Fradkov and criticised the Kremlin-sponsored social welfare reform even though it had quickly approved it last summer.
The reform, which went into effect 1 January, has spawned massive street protests across the vast country - the largest in Putin's five years in power.
Russian pensioners have
opposed social-benefits cuts
Communists and other opposition groups have pushed for the cabinet's ouster over the reform, which replaced benefits such as free public transport and subsidised medicines with cash payments, and have called for a nationwide protest this weekend.
During Wednesday's debates, cabinet critics including United Russia members, went far beyond discussion of the welfare reform, assailing the government's entire economic programme.
"We are seeing a very dangerous trend: amid a favourable economic situation, social tension is higher than ever," United Russia member Oleg Morozov said on behalf of his faction.
Morozov added that the cabinet's mistakes had hurt Putin. "The social price of the errors is rising and the president is increasingly coming under blows," he said.
Before the vote, Fradkov addressed the chamber and apologised.
"The government takes complete responsibility for the organisation and conduct of this reform," he said. "I personally, as the head of government, do not escape responsibility."
Fradkov asked for half a year to correct the situation with provision of subsidised medicines, and said the government would seek to at least double the average monthly wage by 2008.
He said the government's main task remained the doubling of the gross domestic product by 2010. The government had to set "precise and clear" rules for business, he said. "They may be tough but they cannot change every month."
Prime Minister Fradkov (L) has
asked for time to rectify matters
Many lawmakers were openly contemptuous of the prime minister, laughing derisively during parts of his presentation.
Outside, protesters - most of them elderly- complained that the new monthly payments of about $10 are worth far less than the benefits.
The reform has also angered the military by depriving servicemen of free rides on public transport. Defence minister Sergei Ivanov said that military pay would be raised by roughly one-third from 1 March.