The parliamentary session ended with 36 MPs voting against the bill, while the remaining lawmakers abstained. At the heart of the opposition was a controversial levy of at least 6.75 percent that would be slapped on all bank deposits across the island, including a 9.9 percent charge for deposits above 100,000 euros.
The terms of the bailout deal had been reached at the weekend, when the EU, the European Central Bank and the IMF agreed to provide Cyprus with 10 billion euros on condition that the island raises another 5.8 billion euros.
Originally the troika had requested a 9.9 percent levy on all bank accounts, though the Cypriot government eventually backtracked and dropped the proposed tax on savings below 20,000 euros, while keeping it at 6.75 percent for deposits of 20,000-100,000 euros and 9.9 percent for those above 100,000 euros.
Before the vote was cast, Cyprus speaker Yiannakis Omirou, from the socialist Edek party, called on all MPs to unanimously reject the deal.
The vote was met with applause from a large crowd gathered outside the parliamentary building, who had earlier lined the streets with banners protesting the deal.
"We're happy because the vote is what the people wanted. We are still very anxious but we hope we are going to find an alternative and a solution because it's clear that Europe is not the solution," said Maria Gnatiou, a 27-year-old historian.
Cypriot President Nicos Anastasiades said he "fully respects" the decision of his parliament and told the public that he has had a "constructive" phone call with Russian leader Vladimir Putin, in regards to alternative financing.
According to Bloomberg, Anastasiades also phoned German chancellor Angela Merkel prior to the vote, warning that there was little political support for the bailout among the MPs.
German Finance Minister Wolfgang Schaeuble, in a statement, said that he “regretted” the Cypriot parliament’s decision, though he maintained that the “offer remains on the table.”
Similarly, Dutch Finance Minister Jeroen Dijsselbloem, who heads the eurozone’s finance ministers group Eurogroup, said later in the day the eurozone still stood ready to help Cyprus in the future.
"I confirm that the Eurogroup stands ready to assist Cyprus in its reform efforts and reiterate the position of the Eurogroup" given Monday when it offered easier bank levy terms so as to reduce the impact on smaller savers, Dijsselbloem said in a brief statement.
Dijsselbloem also deflected criticism for the highly controversial bailout plan, claiming that Cyprus was "a situation that cannot be compared to any other situation in Europe.”
“They are on the brink of bankruptcy," Dijsselbloem told Dutch television station RTL7. "They have to be brought back from the brink of the abyss, but that will entail a contribution of six billion euros.”
Related: Cyprus: More Worrisome Than Greece?