The Senate has rejected a gambling compact that would have allowed the Navajo Nation to open three additional casinos.
The compact required approval of the Legislature and the Interior Department to take effect.
The Senate voted 31-10 against the agreement on Wednesday, which the House approved the day before.
Navajo President Ben Shelly said he was disappointed in the Senate and with other tribes that objected to the compact. He said the Navajos will consider their options, including possible legal action against the state.
The Navajos operate two Las Vegas-style casinos in New Mexico under a compact expiring in 2015. They have a third casino with low-stakes gambling not subject to state regulation.
Other tribes and pueblos worry their casinos will lose gamblers if the Navajos expand gambling.
Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.