The resolution would have imposed a travel ban and asset freeze on Robert Mugabe and 13 of his cronies, plus an arms embargo on the country
But although nine countries, including America, Britain and France, backed the proposals, five countries voted against, including Russia and China, which both enjoy powers of veto as permanent members of the Security Council.
"The people of Zimbabwe will not understand the Russian and Chinese veto," said the foreign secretary David Miliband, adding that he was "very disappointed."
The measures were proposed after Mr Mugabe was "re-elected" in a one-candidate election that was heavily criticised because of the violent tactics that forced the opposition candidate Morgan Tsvangirai to withdraw.
More than 100 people, mostly opposition supporters are said to have died in the attacks.
Diplomats at the UN are normally aware of their colleagues' intentions before a vote is taken, and in the circumstances it is perhaps surprising that the US, which proposed the resolution, pressed it to a decision.
The result will be seized on by the propagandists of Zanu-PF, Zimbabwe's ruling party, who insist that Zimbabwe's economic travails – inflation is estimated at over eight million per cent – are due to Western plots, rather than Mr Mugabe's mismanagement.
Some UN officials had argued that a parallel mediation process being led by the South African president Thabo Mbeki should have been given a chance to succeed without imposing stronger measures.
But without new international pressure, Mr Mugabe will see little need to make concessions to the opposition Movement for Democratic Change in the talks.
The defeat follows the failure of the African Union to condemn Mr Mugabe, despite observer missions criticising the election. Some leaders on the continent even made a point of overtly supporting him.
The veto leaves Mr Mugabe looking ever more secure in office, despite the blood shed for his 're-election', and demonstrates the difficulty of ensuring concerted international action – which would have been necessary to enforce the sanctions even if they had been passed.
Both Russia and China have questionable human rights records of their own, and have long been reluctant to support international intervention in what they see as other countries' internal affairs.
The Russian president Dmitry Medvedev had given ambivalent indications about his country's intentions at the G8 summit in Japan earlier this week. And China is one of Mr Mugabe's oldest allies and arms suppliers, a link dating back to the war against Ian Smith's regime, when it backed his Zanu guerrilla movement.
South Africa, Libya and Vietnam also voted against the resolution while Indonesia abstained.
It is the latest example of South Africa failing to support action against repressive rulers, despite the ruling African National Congress' own backing for sanctions when it was leading the struggle against apartheid.
Last year the country voted against a resolution calling for the Burmese junta to stop attacking ethnic minorities and engage in substantive dialogue with the democratic opposition.
Earlier yesterday Archbishop Desmond Tutu, the Nobel laureate, expressed frustration that some leaders on the continent had not condemned Mr Mugabe.
"Obviously it would have been wonderful if there had been unanimous condemnation by all the leaders of Africa, but politicians are politicians," he said.
