Already the country's longest serving leader, Morales lost a referendum 52.3 per cent to 47.7 per cent, according to Ipsos exit polls -- unofficial figures cited on private ATB television.
It was the worst -- and first -- national political defeat for Morales, who has led the Andean nation for a decade.
He had said he expected to see 70 per cent in support of his bid.
Last month, he became the longest serving president since Bolivia's independence from Spain in 1825 -- a rare accomplishment in a country known for military coups and shaky, short-lived governments.
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The campaign formally ended on Thursday but continued furiously on social media sites like Facebook and Twitter throughout the weekend.
Morales has overseen robust economic growth in Bolivia, but opponents accuse him of presiding over corruption and investing in flashy infrastructure projects at the expense of health and education.
Morales's most recent, and perhaps most damaging, scandal relates to charges of favouritism shown to CAMC, a Chinese engineering company that won the bid for a major railroad expansion project.
One of the top managers at CAMC's La Paz office is Gabriela Zapata, 28 -- Morales's former girlfriend.
However, he recently admitted to having a child with Zapata during a two-year relationship that began in 2005 when she was 18. Morales said the child later died.
The president rejected corruption allegations as "a hoax by the US embassy" to discredit him, and insists that he has "nothing to hide."
In an attempt to clear his name, Morales has asked state accounting authorities to investigate the process by which the government signed contracts worth USD 576 million with CAMC.
Congress has also opened a probe into the corruption allegations.