The national referendum asked whether the flag which includes the Union Jack should be replaced by a design called Silver Fern, which won an earlier ballot.
According to the preliminary results, 56.6% voted for no change, while 43.1% opted for the new design. Just over 2.1 million votes were cast.
Prime Minister John Key had advocated the new flag but called on New Zealanders to “embrace” the people’s decision.
John Key was speaking after the preliminary result was announced following the close of the postal vote at 19:00 local time.
A final result taking into account late ballots will be announced on March 30.
John Key said he was disappointed but would support the current flag.
Despite criticism of the cost of the vote and the process, the prime minister argued that it had at least generated discussion.
“You can’t shy away from a debate or a discussion about nationhood,” John Key told reporters.
The existing design features the British Union Jack, a legacy of New Zealand’s days as a British colony and the reason many wanted to change it.
The proposed new design combines four red stars representing the Southern Cross constellation – also seen in the current flag – with a silver fern on a blue background with black infill in the corner – both motifs associated with New Zealand and its famous rugby team.
The Silver Fern was chosen in the first referendum in December 2015 from a shortlist of five candidates.
One of the most vocal groups opposing the flag change was the military veteran group the Returned and Services Association.
The exercise has been mired in controversy from the start.
Many objected to the 12-member panel overseeing the process not including a designer, and the long list whittled down from thousands of entries was said to lack imagination.
Many also described the process as unnecessarily expensive, with the bulk of the NZ$26 million ($17 million) cost going towards conducting postal voting.
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