The executive has failed to agree a plan to more than halve the number of Northern Ireland's councils to 11.
Next year council elections will be based on the original model of 26.
SDLP, Sinn Fein and Alliance ministers all voted for the 11 council model but the three DUP ministers voted against. The UUP ministers did not vote.
Michael McGimspey, Sir Reg Empey and Edwin Poots absented themselves from the vote due to their roles as councillors.
The Environment Minister Edwin Poots, will now write to the Northern Ireland Office Minister, Hugo Swire recommending that he proceeds with elections for the 26 councils.
Sinn Fein Regional Development Minister Conor Murphy said he was angry that an opportunity had been wasted.
"When we were facing a very tight financial situation we had a chance to put our own house in order.
"We could deal with the issue of local government and start driving out some efficiencies and we have fallen at the first hurdle."
Ulster Unionist MLA Roy Beggs blamed the DUP and Sinn Fein for the failure to reach an agreement.
"Instead of building consensus, they insisted on pressing on with their own scheme, not listening to the concerns of others.
"On top of this they failed to make financial provision for the reform package - at the end of the day, they couldn't afford their own scheme.
"Local government reform now joins a depressing list of costly Executive failures - post-primary transfer, ESA, Maze, shared future."
Alliance MLA Stephen Farry expressed his party's frustration at the failure of the Stormont Executive to proceed with the reform of local government after a process of eight years.
"This failure to take a clear decision does not reflect well on the Executive and hopes for good government. Great efforts have been made by many stakeholders to get to this point.
"At a time of great financial pressure people will rightly be asking why this major reform process of the public sector has stalled.
Councillor John Mathews, President of Northern Ireland's Local Government Association (NILGA) said that the decision was unacceptable.
"The Executive needs to know that local government has supported this programme at every step of the way, in spite of the minister's obstacles.
"My colleagues and I have not agreed to delay any part of the programme and find it is disgraceful that local government in Northern Ireland is left with fewer services to deliver to their citizens, than any council in Europe."
Speaking after the meeting on Monday night Edwin Poots said the cost of amalgamating would have "exceeded the financial benefits that would've been derived".
"It was therefore important that we re-identify where cost savings can be made so that we're not sacking teachers and nurses to pay for local government reform."
Last week local government representatives gave a qualified yes to the environment minister's demand that they pay the cost of council reform.
The 26 councils agreed to meet the bill if it was based on principles of fairness, with the cost for reducing the number of councils to 11 estimated at £118m.
Mr Poots told the assembly last year that the £118m cost to fund the process of cutting councils would mean savings of £438m could be made over 25 years.