Supporters of the so-called media shield bill must now decide whether to proceed without counting on administration support.
Sen. Chuck Schumer, D-N.Y., said several weeks ago that he expected the administration would agree to a bill he could support, especially in cases involving leaks of national security information. He now sharply criticizes the Democratic administration.
"The administration's opposition to the core of this bill came as a complete surprise and doesn't show much concern for compromise. This turns the bill's near-certain passage into an uphill fight," Schumer said.
White House spokesman Ben LaBolt said negotiations are continuing, and President Barack Obama supports a strong media shield law.
"Consistent with his support for openness and transparency in government, the president has long believed that the law should protect the confidentiality of reporters' sources unless there is a significant security risk," LaBolt said.
"This is the first administration in history to support media shield legislation, and we are engaged in a dialogue with members of the Senate in an effort to pass the first-ever federal media shield law with bipartisan support."
The key issue is whether a federal judge - in cases of national security leaks - would be required to balance the public's right to know against the need to protect national security.
Schumer was hoping for a compromise that would lay out the standards the government on one hand, and the journalist on the other, would have to meet to win in court. A judge would then balance the competing arguments.
Instead, the administration suggested there should be no balancing test in cases where the government is trying to identify a leaker who harmed national security.
Schumer believes this would make a shield law meaningless.
The bill, supported by more than 70 journalism organizations including The Associated Press, would only apply to federal courts and leave intact state protections for journalists and their sources.
The House already has passed a media shield bill.