The National Reform Council on Sunday voted 135-105 with seven abstentions to reject the draft constitution.
The rejection of the draft charter was expected following heavy lobbying over the past week, reportedly by NRC members closely linked to the military.
At 8am, a large contingent of metropolitan police, both in uniform and plainclothes, were deployed in the parliament compound and outside.
Steel barricades were put up to block main roads to the parliament and only members of the NRC and concerned personnel were allowed inside.
NRC members then gathered for a group photo before attending their last meeting for the crucial vote.
The meeting began at 10am under the chair of council president Thienchay Kiranandana.
The voting began at 10.35am with all 247 NRC members in attendance, including 21 members of the Constitution Drafting Committee led by Bowornsak Uwanno.
NRC members were called up by name alphabetically to declare verbally to "approve" or "reject" the draft constitution.
Following the vote count, which took less than one hour, Mr Thienchay announced the result which saw 135 members vote to reject the draft and 105 vote for it, while seven members abstained.
As a result of the draft charter being voted down, the National Reform Council’s term ends and a 21-member charter drafting committee will be set up. It will have 180 days to draft a new charter.
After the new drafting commitee finishes its work, a new draft constitution will be put to a public referendum.