The measure, sponsored by New York Democrat Sen. Kirsten Gillibrand, was backed by 49 other senators but failed to pick up the 60 votes needed to be added to the annual defense authorization bill. Forty-nine senators opposed the change.
A similar effort in spring 2014 fell five votes short of passage.
Despite the continued setbacks, Gillibrand vowed to continue pushing for the change.
"American military, if they do these reforms, will have fewer dangerous criminals and far more heroes," she said before Tuesday's vote. "The brave men and women we send to war to keep us safe deserve nothing less than a justice system equal to their sacrifice."
Gillibrand's reform plan has been divisive across Senate party lines, with several Republicans breaking ranks to support the changes and fellow Democrat Sen. Claire McCaskill of Missouri D-Mo., leading the charge against the moves.
Military leaders have argued that separating sexual assault cases from the rest of the military justice system would give commanders less incentive to root out the crimes and would work against other efforts to enact cultural changes within the military.
"Every aspect of the chain of command is responsible," McCaskill said Tuesday. "It is their job to train troops, to maintain good order and discipline to prevent rapes and crimes being committed under their command, and to punish retaliation."
But Gillibrand charged that the rate of assaults in the military has experience virtually no change is virtually unchanged over the last four years, with an average of 52 new cases a day.
A Pentagon survey released in May estimated the military saw more than 19,000 sexual assaults last year, with more than half involving male-on-male crimes.
"No one should have to suffer the chain of command when they report these crimes," Gillibrand said. "Retaliation happens so often that a majority of these assaults go unreported. Every military victim of sexual assault deserves due process, professional treatment by a trained military official at each opportunity to seek and receive justice."
Congress has passed a host of related sexual assault reforms in recent years separate from Gillibrand's measure, including new laws aimed at stopping retaliation for reporting crimes and new legal resources for victims of such attacks.
Leo covers Congress, Veterans Affairs and the White House for Military Times. He has covered Washington, D.C. since 2004, focusing on military personnel and veterans policies. His work has earned numerous honors, including a 2009 Polk award, a 2010 National Headliner Award, the IAVA Leadership in Journalism award and the VFW News Media award.