But a crowded senate calendar complicates the bill's chances of being re-tabled in the future.
In the House of Representatives, Democratic leaders do not intend to act on the issue until the senate has finished considering it.
The legislation would tighten borders and institute a new system to prevent employers from hiring undocumented workers, in addition to giving up to 12 million illegal immigrants a pathway to legal status.
"Doing nothing is not an alternative. This issue isn't going away"
Edward M Kennedy, Democratic senator
Many in the senate argued they needed more time to make the bill tougher with tighter border security measures and a more arduous legalisation process for unlawful immigrants.
Even those who support the bill have argued that it would make second-class citizens of temporary workers and would prioritise employability over family ties in future immigration.
"We can all find different aspects of this legislation that we differ with," said senator Edward M Kennedy, a Democratic and one of the architects of the bill.
But he said he hoped the measure would survive the vote, saying: "Doing nothing is not an alternative. This issue isn't going away."
Kennedy had partnered with senator Jon Kyl, a republican, and several others to create the bill, essentially a compromise that tired to balance tougher border security and limits to immigration with plans to legalise millions of people who are living and working in the US unlawfully.
Kyl, however, broke from the bipartisan clique that hatched the agreement, siding with Republicans who said they hadn't gotten enough chances to toughen the bill.
"It's time to scrap this mess of a bill," said Jim DeMint, a republican senator who had failed in several attempts to make the measure more punitive toward illegal immigrants.
Senator Arlen Specter, a Republican and another proponent of the bill, said he believed "that we will yet succeed".
Frank Sharry, the executive director of the National Immigration Forum, called the vote "a huge disappointment to immigrant communities and those seeking a solution to the dysfunctional immigration system".
He said: "We fear the result was a matter of politicians, particularly Republicans, not wanting to confront obstinate members of their own parties in order to let the majority's will, and the people's will, prevail."
A survey, conducted between May 30 and June 3 by the Pew Research Centre for the People and the Press, found that about two-thirds of the American public were in favour of the bill's proposal to give illegal immigrants citizenship if they have jobs, pass background checks and pay fines.