The centre-right majority coalition of conservative Christian Democrats and pro-business Free Democrats voted against the proposal, while the Greens, who oppose the project, abstained.
The party withheld its votes after the SPD refused to incorporate their changes into the proposal, which would have put the issue up to a referendum vote during state elections in March 2011.
The decision came following protests in Berlin on Tuesday, when activists from Stuttgart chartered a special train to the capital for a full day of protest in hopes of keeping the national spotlight on their case.
A growing number of people in the southern city have been attending ongoing protests to air their concerns about the project, which they say is unnecessary, too expensive and a potential danger to the environment.
Stuttgart 21 will require 16 new tunnels, 18 new bridges, 60 kilometres of new train track and three new stations. Stuttgart's terminus will be transformed into an underground through-station. The cost of Stuttgart 21 project is estimated at €4.1 billion but related rail overhauls are expected to cost a further €3 billion.
Meanwhile four demonstrators registered a formal complaint against Stuttgart police with a local court on Thursday, saying that they had all suffered severe injuries to their eyes from water cannons during a September 30 protest that turned violent.
The men said doctors feared their eyesight would be permanently damaged, and one of them could be blinded for life.
“The four of us must live a lifetime with the results of this inappropriate and illegal police operation,” said Alexander Schlager, one of the complainants.
This week the state parliament opened an official inquiry into police conduct on that day. By January 2011, politicians hope to clarify who was ultimately responsible for the clash with demonstrators.