The vote -- 230-195 to reject the measure -- could increase the possibility the government will shut down Oct. 1, the beginning of the next fiscal year, The Washington Post reported.
At issue is funding for the Federal Emergency Management Agency, which is running out of money to reimburse local governments and individuals for repairing disaster damage. As of Tuesday, the fund had dipped to $256 million.
House Republican leaders failed to satisfy Democrats who argued the bill did not include enough relief for disaster victims, or conservative Republicans who were demanding deeper spending cuts, the Post said.
GOP House leaders had included $774 million for disaster relief in the continuing resolution that would be available upon passage and $226 million for flood relief efforts by the U.S. Army Corps of Engineers. The bill would have authorized $2.65 billion for the disaster relief fund for fiscal year 2012.
Senate Democrats said the House wasn't providing enough and the White House recently said the disaster relief fund needs $500 million now and would need $4.6 billion next year, the Post said.
Senate Democrats also decried House GOP efforts to offset $1.5 billion of the disaster funding by reducing funds to a loan program to car manufacturers to encourage production of energy-efficient vehicles.
Last week, 10 Senate Republicans joined Democrats to approve a $6.9 billion disaster relief measure that would fully fund Obama's request, and $1.8 billion more in disaster cleanup funds.
Senate Majority Leader Harry Reid, D-Nev., said Tuesday he would try to amend the House bill with the Senate's $6.9 billion figure when it reaches the upper chamber later this week. House leaders said a bill with more FEMA funding likely won't pass their chamber.
While Senate Minority Leader Mitch McConnell, R-Ky., downplayed the possibility of a shutdown because "Congress always responds appropriately to disasters," Reid said he wasn't so certain this time.
"We're not going to cave in on this, because it's a matter of principle," he said.
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