With returns from only four of 210 constituencies outstanding, the
Electoral Commission of Kenya (ECK) said 57 percent, or 3,548,477, of voters cast "no" ballots, while 43 percent, or 2,532,918, voted "yes" in Monday's plebiscite.
"We declare that the proposed new constitution was not ratified by the voters as provided by the law," ECK chairman Samuel Kivuitu told reporters at a raucous news conference attended by many opponents of the draft.
Moments before he spoke, a somber Kibaki conceded defeat in a live televised address to the nation and congratulated Kenyans for peacefully participating in the referendum and urged them not fall prey to divisions that dogged the campaign.
"This referendum... has come out with a clear verdict that the proposed constitution is not acceptable to the majority of Kenyans," he said in the brief speech in Swahili, later released by his office in English.
Opponents of the constitution also called for harmony and reconciliation.
"The people have made a choice and as I have always said, my government would respect the choice of the people," he said.
"There are no winners or losers in this process as the objective of this important exercise was to determine the people's choice and that choice has been made," Mr Kibaki said.
"Let us continue with the way we have lived as Kenyans, which is (the) envy of many," he said, vowing that any new effort to revise or replace the existing charter would take a back seat to development.
The defeat of the draft in Kenya's first-ever referendum followed a vitriolic and violent campaign that deeply split the east African country, in which at least eight people were killed in the last two months.
In July, another person was killed when violence rocked the capital after parliament voted to send the draft to voters despite a public outcry over its provisions to retain near absolute power in the presidency.
Foes of the draft, the first major changes to Kenya's charter since independence from Britain in 1963, led by opposition chief Uhuru Kenyatta and Mr Kibaki's influential Roads Minister Raila Odinga, had urged its rejection.
Some Christian church leaders also opposed the document because it gave legal status to Muslim courts and carried provisions that they believe could legalise on-demand abortions and gay marriage.
Mr Kenyatta and Mr Odinga accused Mr Kibaki, who was elected in 2002 on a reform platform, of reneging on promises to address popular demands to devolve significant executive powers to a new prime ministerial position.
The draft creates such a post but endows it with mainly ceremonial duties and Mr Kenyatta, son of Kenya's revered founding president Jomo Kenyatta, said that was the reason the constitution had failed.
"The people have triumphed," Mr Kenyatta told reporters. "This triumph shows that the future of the country lies not in an imperial presidency but in an accountable leadership."
As it became clear that Kibaki's "yes" camp had suffered an embarrassing political defeat ahead of presidential elections in 2007, jubilant crowds of constitution foes paraded through the streets of the capital.
Unlike in the past, when security forces have cracked down on such demonstrations, police kept a safe distance amid praise that Kenya had proved its political maturity on the largely peaceful polling day.
Observers said the rejection was a sign of increasing disenchantment with Mr Kibaki who has come under fire for failing to follow through on campaign promises to clean up endemic corruption and implement reforms.