The 247-member National Reform Council (NRC) rejected the draft charter by 135 votes to 105, with seven abstentions.
"Those in favour were less than half of NRC members, it means this NRC meeting has voted against" the charter, NRC chairman Tienchai Kiranan said in a televised count.
Most of those who voted down the charter were military, police, and politicians.
The decision means there would be no referendum initially set for January next year and delay of the national elections.
As a result of the draft charter being voted down, the National Reform Council's term will end and a new 21-member constitution drafting committee will be set up. It will have 180 days to draft a new charter.
After the new drafting committee finish its work, a new draft constitution will be put for a public referendum in four months.
The military abolished previous constitution after it toppled Prime Minister Yingluck Shinawatra last year following months of political unrest and the government functions under a temporary charter.
The military government retains its substantial powers until a new constitution is drafted. The rejection would delay Thailand's transition to electoral democracy.
The rejection of the draft charter was expected following heavy lobbying during the past week, reportedly by NRC members closely linked to the military, the Bangkok Post said.
In the voting process, council members were called up by their names alphabetically to declare verbally to "approve" or "reject" the draft constitution.
Those opposed to the charter see it as an attempt to entrench the military's political power and argue that it would prevent genuine democracy from taking root.
The army's coup last year, the 12th since the end of the absolute monarchy in 1932, after it failed to forge a compromise between political rivals to end nearly seven months of political conflict that left Thailand in limbo.
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