In a crucial vote on Friday as Congress raced towards adjournment, the bill's Senate supporters were not able to garner the 60 votes necessary to overcome a threatened filibuster, a technique used to delay debate. The final vote was 52-47.
Bush, Alberto Gonzales, the attorney-general and Republican congressional leaders had lobbied fiercely to make most of the expiring USA Patriot Act provisions permanent, and add new safeguards and expiration dates to the two most controversial parts: roving wiretaps and secret warrants for books, records and other items from businesses, hospitals and organisations such as libraries.
Critics say the efforts were not enough, and have called for a short-term extension so they can continue to try to add more civil liberty safeguards to the law.
But Bush, Bill Frist, the Senate majority leader, and Dennis Hastert, the house speaker, have said they will not accept a short-term extension.
If a compromise is not reached, the 16 Patriot Act provisions expire on 31 December.
Frist changed his vote at the last moment after seeing the critics would win so he could call for a new vote at any time. He immediately objected to an offer of a short term extension from Democrats, saying the House won't approve it and the president won't sign it.
"We have more to fear from terrorism than we do from this Patriot Act," Frist warned.
If the Patriot Act provisions expire, Republicans say they will place the blame on Democrats in next year's midterm elections.
Scott McClellan, the White House press secretary, said: "In the war on terror, we cannot afford to be without these vital tools for a single moment.
"The time for Democrats to stop standing in the way has come."
But the Patriot Act's critics got a boost from a New York Times report saying Bush authorised the National Security Agency to monitor the international phone calls and international emails of hundreds, perhaps thousands, of people inside the United States.
Previously, the NSA typically limited its domestic surveillance to foreign embassies and missions and obtained court orders for such investigations.
Russ Feingold, a Democrat, said: "I don't want to hear again from the attorney-general or anyone on this floor that this government has shown it can be trusted to use the power we give it with restraint and care." Feingold was the only senator to vote against the Patriot Act in 2001.
"It is time to have some checks and balances in this country. We are more American for doing that"
Patrick Leahy, a Democrat senator on the judiciary committee, said: "It is time to have some checks and balances in this country. We are more American for doing that."
Most of the Patriot Act, which expanded the government's surveillance and prosecutorial powers against suspected terrorists, their associates and financiers, was made permanent when Congress overwhelmingly passed it after the 11 September 2001 attacks.
Making the rest of it permanent was a priority for both the Bush administration and Republican leaders on Capitol Hill before Congress adjourns for the year.
The House on Wednesday passed a House-Senate compromise bill to renew the expiring portions of the Patriot Act that supporters say added significant safeguards to the law. Its Senate supporters say that compromise is the only thing that has a chance to pass Congress before 2006.
But the bill's opponents say the original act was rushed into law, and Congress should take more time now to make sure the rights of innocent Americans are safeguarded before making the expiring provisions permanent.
John Sununu, a Republican Senator, said: "Those that would give up essential liberties in pursuit in a little temporary security deserve neither liberty nor security."
They suggested a short extension so negotiations could continue, but the Senate scrapped a Democratic-led effort to renew the USA Patriot Act for just three months before the vote began.