The Senate blocked on Saturday a vote on the DREAM Act which would have provided children of illegal immigrants a conditional pathway to apply for citizenship.
In a 55 to 41 vote, the immigration reform bill – Development, Relief and Education for Alien Minors Act – failed to win the 60 votes it needed to break a Republican filibuster.
Three Republican senators voted with Democrats to end the debate and move to an up-or-down vote. Five Democrats sided with Republicans.
The defeat put an end to the immigration reform bill for the rest of the year and perhaps until the end of President Obama's term.
In a statement, Obama called Saturday's vote "incredibly disappointing" but pledged that his administration will continue in its fight to fix the nation's "broken immigration system."
The president said the DREAM Act is the "right thing" to do for America's "economic competitiveness, military readiness, and law enforcement efforts."
"Our nation is enriched by their talents and would benefit from the success of their efforts," he stated. "There was simply no reason not to pass this important legislation."
The controversial bill was passed by the House last week by a narrow vote of 216 to 198.
Under the legislation, undocumented immigrants under the age of 30 who were brought to the country before they were 16 and have been living in the U.S. continuously for five years would be eligible for conditional non-immigrant status.
DREAM applicants would need to have graduated from high school and go on to attend college or join the military for a minimum of two years.
They would wait 10 years after gaining permanent resident status before they apply for citizenship.
Opponents of the bill said it amounted to "amnesty," would cost taxpayers, and would encourage people to enter the country illegally.
"This bill is a law that at its fundamental core is a reward for illegal activity," said Alabama Republican Sen. Jeff Sessions during his comments on the floor.
Other critics of the bill said it never went through a Senate committee hearing and no amendments have been allowed.
"I am sympathetic to the plight of children who have no moral culpability for being in this country illegally and I support the intent of the bill today, but not this legislation and not this way," said Texas Republican Senator John Cornyn. "Despite years of objections this bill still allows illegal immigrants with criminal records to apply and receive benefits."
Frank Sharry, executive director of America's Voice, an immigrants rights group, said it wasn't sympathy that DREAMers needed but the votes of senators.
"Your vote against DREAM will be remembered as long as you are in politics," said Sharry in a statement.
He said the group will "continue fighting, organizing, mobilizing and educating" and that "victory is not a matter of if, but a matter of when."
Supporters of the DREAM Act accused senators who rejected the bill of playing politics.
"The Senate's Grinch-like rejection of the DREAM Act that won bipartisan House approval last week shows how most Republicans would rather score short-term political wins than do the right thing," said Angela M. Kelley, vice president for Immigration Policy and Advocacy at the Center for American Progress Action Fund.
She called the legislation a "common-sense bill" that would have increased federal revenues by $1.7 billion over 10 years.
Allison Johnson, campaign coordinator of Christians for Comprehensive Immigration Reform, which has urged for the bill's passage, called the Senate vote a setback and not a failure.
"We can be angry, bitter, cynical, and even furious for today. But tomorrow, we move forward. We pick ourselves back up, dust off the dirt of despair, and keep at it," Johnson wrote in a blog for Sojourners, a progressive Christian group that supports the DREAM Act.
"There are vigils to attend, actions to plan, sermons to write, and young people to comfort. We can be a witness and comfort to our friends, colleagues, and neighbors who are burned out and depressed."
Christians for Comprehensive Immigration Reform is a coalition that supports comprehensive U.S. immigration reform. The coalition is comprised of American Baptist Churches USA, National Council of the Churches of Christ in the USA, World Relief Episcopal Church, Esperanza USA, and Evangelicals for Social Action, among others.