Ulf Kristersson was the leading member of the entire centre-right Alliance before September's election and their candidate for prime minister - but now half of the Alliance parties seemed to have voted him down.
The Liberal and Centre parties want to avoid the Sweden Democrats, who they see as far-right extremists, having influence over a government.
On Tuesday the leader of the Sweden Democrats stated he expected that he would indeed have influence over a Kristersson government, but the Moderate Party says this is not the case.
The vote was 195 against Kristersson, well above the 175 needed to stop a prime minister candidate.
After Wednesday's vote the Speaker of the Riksdag will hold a press conference. It is his responsibility to propose a new candidate for prime minister.