Democrats, normally allies in the largely progressive Midwestern city, split over the ballot question.
Minneapolis voters have decided not to replace their police force with a new department that would have taken a holistic approach to crime.
With all precincts reporting tallies, more than 56 percent of voters on Tuesday rejected a ballot asking residents if they wanted to create a new Department of Public Safety to take the place of the police department.
The vote was held 18 months after the murder of George Floyd in the city sparked global protests for racial justice.
Leili Fatehi, campaign manager for All of Mpls, which campaigned against dissolving the police department, said voters gave a clear mandate for continuing to work on reforms within the structure of the agency.
She said neither side of the ballot measure is happy with the status quo of policing in the city, but they disagree on how best to make changes.
Minneapolis was thrust to the centre of the US racial justice debate in May 2020 when officer Derek Chauvin pinned his knee against the neck of Floyd, a Black man, for more than nine minutes. Chauvin was sentenced in June to 22 1/2 years in prison.
Three other officers charged in Floyd's death face trial in March.
Floyd's death ignited calls from activists to "defund the police" - which even most of those who supported scrapping the Minneapolis police department rejected.
Instead, they called for rethinking how and when police are used, not the disbanding all armed officers.
Some of the state's best-known progressives - such as US Representative Ilhan Omar and Minnesota Attorney General Keith Ellison, who oversaw Chauvin's prosecution - supported the change.