Despite his calls for unity, lawmakers from three parties boycotted the vote: the powerful 5-Star movement; center-right Forza Italia and the far-right League.
Foreign Minister Luigi Di Maio said the events represented “a black page for Italy,” in a tweet.
“On this day of madness, Parliament decides to go against Italy,” he wrote on Twitter.
Earlier on Wednesday, Draghi had asked lawmakers to support the coalition government in an effort to avoid calling a snap election.
“We need a new pact of trust, sincere and concrete, like the one that has allowed us so far to change the country for the better,” he said.
“If we still want to stay together, the only way is to rebuild this (national unity) pact with courage, altruism, credibility,” the former European Central Bank chief added.
Another former premier, Matteo Renzi, thanked Draghi for his efforts after the vote.
“As I said in the Senate from tomorrow nothing will be the same again,” he wrote. “Proud of having wanted it against everything and everyone. Proud to have supported him even today.”
Last week, Draghi tendered his resignation after the 5-Star movement — the largest party in the country’s coalition government — withdrew its support in a parliamentary confidence vote on a package designed to tackle Italy’s cost-of-living crisis.
He had previously said that he would not lead a government that did not include 5-Star.
Draghi’s resignation however was rejected by Italy’s President Sergio Mattarella, who urged him to stay and find a solution.
This is a breaking news story and will be updated.
