The motion, blocking Labour’s entry into government and adopted on Wednesday by 843 to 612, is a severe blow to Sharon’s Gaza pullout plan.
An alternative motion filed by Sharon’s camp which would have authorised him to negotiate with “any Zionist party” was defeated by 19 votes, Likud officials said.
Sharon needs to bring Labour into a new broad-based coalition to give him a parliamentary majority for his so-called disengagement plan which will involve the withdrawal of all settlers and troops from the occupied Gaza Strip next year.
Sharon lost his majority in the 120-seat Knesset in June when traditional right-wing supporters balked at what they regard as the “forcible transfer of Jews”.
A source close to Sharon said after the vote that the Israeli prime minister was now likely to call elections in the next six months.
In his speech before the vote, Sharon made no direct reference to the disengagement plan, which also envisages the de facto annexation of larger West Bank settlement blocks, but said Israel was facing a moment of truth.
“There are times in the life of a nation when it is forced to take hard and fateful decisions. The state of Israel has reached this point,” he said.
But hardline cabinet minister Uzi Landau, who has been leading the campaign against Labour’s entry into government, said Sharon’s coalition plans would undermine the core values of Likud.
“If the Labour party joins the government, it will lead to the dismantling of the government, and we will have to hold new elections,” he said.