A bill that would have allowed same-sex marriage in NSW has been defeated in the upper house by one vote.
It followed an emotional debate in the upper house on Thursday.
NSW Labor MP Helen Westwood cried as she read out a "hate letter" she received on the issue.
"Dear Madam," it read, "What the hell is wrong with you people?
"No straight-thinking Australian wants to hear about queers getting married. Marriage is not a game between poofters and lesbian sluts.
"... wake up woman to the call of the majority who would rather see all queers burnt at the stake not married.
Ms Westwood said a particularly distressing aspect of the letter was that its author was a highly-educated barrister and partner at well-established legal chambers in Sydney.
She believed the man thought he could write such "hateful and hurtful words" because he thought she was a "lesser human being".
"The fact is while we have laws in this country that excludes one group of Australians we are ... validating discrimination and we are validating and endorsing prejudice in our country," she told the upper house.
Labor's Penny Sharpe said the bill was the culmination of a public debate that had seen a record number of submissions to a parliamentary inquiry.
She said no one would be forced to marry a same-sex couple under the bill and that no one had anything to fear.
Christian Democratic MP Fred Nile said the decision was a "great victory in support of marriage".
Mr Nile credited the outcome to last month's statement by Premier Barry O'Farrell, in which he stated his preference for national same-sex marriage laws to avoid a "patchwork quilt" of state legislation.
"He (Mr O'Farrell) was a bit reluctant but he finally agreed to make that public statement and it did have the effect that I was hoping it would have on some of the wavering members of the coalition," he told reporters on Thursday.
He said he was "very, very happy" at the outcome and would be "celebrating the victory" at his own marriage in December.
He urged "very smart people in the homosexual community" to come up with other words that could be used to describe their relationship other than marriage.
While he was happy for same-sex couples to love and live with each other, he said sex should not form part of the equation.
Mr Nile said it was concerning the bill was defeated only narrowly, and he worried about the views held by the younger generation on the issue.
Independent MP Alex Greenwich, a member of the cross-party working group that devised the bill, remained optimistic.
"We are on the tipping point of reform," he told reporters after the vote.
"Regardless of the result, we know that the gay and lesbian community has a level of respect from our parliament that has not always been there ... this has shown us that marriage equality is doable in NSW."
Nationals MP Trevor Khan said he was "profoundly disappointed".
"If we had convinced one more person in this house then we would be giving a different angle on this," he said.
"You taste the ashes of defeat and I find it very difficult to accept."
He denied Mr O'Farrell's statement was the decisive factor.
Mr Khan said last week it appeared he would be the only "yes" vote on the coalition side, but at the deciding moment three of his colleagues stood with him.
"He (the premier) is the one that gave the conscience vote, he is the one that said he was in favour of marriage equality."
Greens MP Mehreen Faruqi said it was imperative to continue to push for marriage equality at the federal level, as that was the only way the status quo would change.
