The draft was presented with little time left before world leaders were to mark the 60th anniversary of the UN's founding and hold a landmark three-day meeting that begins on Wednesday.
More than 170 leaders have sketched their vision for the global body as it enters its seventh decade.
German ambassador Gunter Pleuger said the document would reflect "what is politically possible right now among 191 members".
But US ambassador John Bolton told the New York Times the document was far short of "the kind of cultural revolution that we need in United Nations management and governance".
He added, though, that Washington would "continue to work" for the reform of the institution.
Hard fought compromises
A 33-member so-called core group of negotiators had been wrangling for three weeks over the thorniest issues, ranging from the creation of a new human rights council and ways of spurring economic development to reducing poverty and overhauling the UN's management.
Under the draft compromise, specific goals were substituted with broad statements of principle.
"I think that people around the world will not understand if, after all the proposed reforms and the presentation of so many meticulously detailed documents, no action is taken"
Diplomats had already predicted the final outcome would be a greatly scaled-down version of the sweeping reforms envisioned by UN Secretary-General Kofi Annan.
The 39-page reform document tried to reconcile the competing interests of rich and poor nations by striking a balance between fighting global poverty and battling terrorism while promoting human rights and UN management reform in the aftermath of the UN oil-for-food scandal.
Human rights problem
After marathon overnight talks, a US spokesman had said on Monday that the discussions on setting up a revamped human rights council and on UN management reforms had fallen apart.
He said some countries were objecting to two key criteria set for the creation of the revamped UN human rights council to replace the current, discredited Human Rights Commission.
An unnamed US official, quoted by the New York Times, identified the countries which raised the objections as Egypt, China, Russia and Pakistan.
Some countries were also objecting to the new council sitting as a permanent body of the UN, instead of the annual six-week session that the Geneva commission holds.
Annan is under fire over the Iraq
In an interview published on Tuesday in the Russian daily Kommersant, Annan said he hoped negotiations would deliver in particular "a substantial result on the issues of development, security, human rights and institutional reforms".
"I think that people around the world will not understand if, after all the proposed reforms and the presentation of so many meticulously detailed documents, no action is taken," he warned.
The 67-year-old Annan is already under fire for his handling of the Iraq oil-for-food programme.
An independent panel cleared him of ethical lapses but documented administration failings and evidence of corruption in the UN's $100-billion humanitarian scheme.