The draft Measure was passed in the House of Bishops and House of Clergy but failed to meet the required two-thirds majority in the House of Laity.
The result means that the legislation in its current form can proceed no further.
It sets the entire process to consecrate women bishops back years as new legislation must now be drawn up from scratch.
Traditionalists repeatedly told Synod that the current provision for them was not generous enough and that they needed more time to reach a better compromise.
Dr Philip Giddings, convener of Anglican Mainstream, suggested the dissenting minority would be excluded from the future of the Church.
"Those who have experience of working for reconciliation know that you cannot achieve a solution unless all parties agree to and own it," he said.
"That is the missing piece in this legislative package. Those for whom the provision is intended do not own it.
"We have been told that we have debated these matters long enough. Long enough, perhaps, for those who are in the majority and can impose their will, but not long enough to gain the consent of those who are opposed and whose consent is essential if we are to remain a united and growing church."
Dr Charles Hanson, of the Diocese of Carlisle, said it was "second class legislation for second class members of our Church".
"As Christians, we can surely do better than that?" he said.
The Reverend Angus MacLeay, of the Diocese of Rochester, said that although there had been promises of provision for traditionalists, there "has been no genuine respect shown in actions for our theological position".
The Reverend Canon Rebecca Swyer , of the Diocese of Chichester, questioned whether it would allow those on both sides of the debate not merely to exist together, but "to thrive".
"Is it about trying to include rather than exclude? Is it about making sure that all continue to have an honoured place or simply putting up with others? It simply isn't clear. The intention of many is far from clear," she said.
The defeat was visibly upsetting to supporters of the legislation.
Introducing the legislation to Synod, the Bishop of Manchester the Right Reverend Nigel McCulloch had argued that a no vote would have done "real harm to the credibility and mission of the Church of England to the people of this nation".
"We have spent much of the past decade debating this issue. I simply cannot believe that it is in the interest of the Church of England for that debate to continue for a further decade, when the overwhelming majority of our dioceses have spoken so clearly," he said.
The current Archbishop of Canterbury, Dr Rowan Williams, and his successor, the Right Reverend Justin Welby both spoke in favour of the legislation.
Dr Williams said that a no vote would "not do anything positive for our mission at this juncture". He added that passing the legislature would be a "liberating moment" for the Church of England.
Bishop Welby said it was "time to finish the job" and show that the Church of England could "manage diversity without division".
The Reverend Canon Rosie Harper said there would be "relief and pain" whatever the outcome of the vote.
She warned that if the Church voted against the legislation, the Church would "have been seen to have failed to do what is right and honourable" and would have "lower moral standards than the rest of society".
She added that it would have been a vote of no confidence in the current Archbishop of Canterbury and his successor.
Others warned that it would impact negatively on the Church's ability to recruit men and women for ordination.
The Bishop of Salisbury, the Right Reverend Nicholas Holtam, said: "If we want to bring the best of our clergy into the episcopate, we must include women in this order as well."
The Venerable Jan McFarlane, of the Diocese of Norwich, told Synod it was "insulting" to suggest the issue had not been given enough time.
"You could argue we've been waiting over 2,000 years to reach this point," she said.
"Yes the legislation is not perfect but we are never, ever going to find legislation that is right for everyone.
"This is not the Church bowing to secular pressure. It is the case of us doing our theology in a context."
Theologian Elaine Storkey said that claims that from some traditionalists that they would be driven out of the Church and be turned into second class Anglicans were "inflammatory".
The Bishop of Bradford, the Right Reverend Nick Baines had agreed. "No one's pushed out," he said.
However, it was the traditionalists who won out at the end of the day.
Although 132 lay Synod members voted for the legislation, it was not enough to reach a two-thirds majority after 74 voted against. There were no recorded abstentions in the House of Laity.
In the House of Clergy, 148 voted for and 45 against, with no abstentions. In the House of Bishops, the legislation passed 44 to 3 in favour, with no abstentions.