The impasse in the state trial is the second time prosecutors have been denied the death penalty against Nichols, who was sentenced to life in prison in 1998 after federal jurors also could not agree on his punishment.
"This is an absolute stunner, given this same jury a couple of weeks ago, took less than four hours to say he was guilty. Clearly at least one jury member felt it warranted life instead of death, " said CBS Legal Analyst Andrew Cohen.
The result is a big disappointment to Oklahoma prosecutors, Cohen said.
"The only reason Oklahoma brought Terry Nichols to trial was to get a death penalty. He's already serving life under federal sentence. It's a huge disappointment to prosecutors and to those who felt he would be given death, if he were to be convicted,'' said Cohen.
Jurors announced they were at an impasse after deliberating for about 19½ hours over three days. Nichols will be sentenced by Judge Steven Taylor, who is required by law to sentence Nichols to life in prison.
The deadlock was a blow to state prosecutors and victims' family members who said death was the appropriate punishment for the bombing of the Oklahoma City federal building.
The jurors deliberated over Nichols' sentence after a week of emotional testimony in the trial's sentencing phase. Nichols faced sentences of life in prison or death by lethal injection on state murder convictions.
The jury convicted Nichols of 161 state murder counts May 26. Taylor set the sentencing for Aug. 9.
Nichols, 49, escaped the death chamber after a federal trial in the late 1990s in which he was acquitted of murder but convicted of conspiracy and involuntary manslaughter in the deaths of eight government agents. Oklahoma prosecutors then brought him to trial for the deaths of the other victims, including one fetus, with hopes of winning a death sentence.
The April 19, 1995, bombing killed 168 people and wounded 500. Timothy McVeigh, Nichols' former Army buddy and the mastermind of the bombing, was convicted of federal charges and executed in 2001 for what was the deadliest terrorist attack on American soil at the time.
Prosecutors said the blast was a twisted attempt to avenge the deaths of about 80 people who died in the government siege at the Branch Davidian compound in Waco, Texas, exactly two years earlier.
They said Nichols helped build the two-ton bomb — made from farm fertilizer and fuel oil — that was packed into a Ryder truck and detonated outside the Alfred P. Murrah Federal Building.
During closing arguments in the sentencing phase, prosecutor Suzanne Lister called the bombing "one of the darkest, ugliest days in American history."
"Think about the number of dreams, the number of plans and the number of loved ones that Terry Nichols destroyed on April 19, 1995," Lister said. "Think of them as individual human beings. One-hundred-sixty-one. Nineteen children. Some of their bodies are torn beyond recognition. Some are decapitated."
Defense attorneys argued Nichols found God in the past four years and has corresponded with prayer partners and made cards for his children. They showed jurors childhood photos of Nichols feeding his pets and clowning with his brothers and sisters.
Just before the start of deliberations, defense attorney Creekmore Wallace stood behind Nichols, put his hands on his shoulders and asked jurors to spare his life.
"This case is about one person, this man, Terry Lynn Nichols, and whether you will take his life," Wallace said. "It's about whether you will kill Terry Lynn Nichols, the man."
Prosecutors put on 65 witnesses during the sentencing phase, including bombing survivors and victims' relatives. The defense called several Nichols family members in arguing that he deserves a chance for redemption.
Nichols was home in Herington, Kan., the day of the bombing. But prosecutors presented a mountain of circumstantial evidence that Nichols and McVeigh worked side-by-side to carry out the attack. They said Nichols bought the fertilizer, stole detonation cord, blasting caps and other materials, and helped finance the plot by robbing a gun dealer.
Defense attorneys maintained that Nichols was the fall guy for a shadowy conspiracy far wider than the government has acknowledged.
Nichols surrendered two days after the bombing — the same day President Clinton vowed: "Justice for these killers will be certain, swift and severe. We will find them, we will convict them, and we will seek the death penalty against them."
Nichols was first brought to trial in federal court in 1997. He was sentenced to life in prison in 1998 after the jury deadlocked on a death sentence.
In 1999, Oklahoma prosecutors charged Nichols with 161 counts of murder with the goal getting the death sentence Nichols escaped in federal court.
His Oklahoma trial began in March and lasted more than three months. Judge Steven Taylor earlier moved the case 130 miles from Oklahoma City to McAlester because of the difficulty in finding an impartial jury in the city where passions still run high over the bombing.