Deputy leader Carrie Lam said the first-ever public vote for the post of chief executive in 2017 would be held in "strict compliance" with a ruling by China's National People's Congress last August.
That ruling stated that candidates for chief executive must first be approved by a loyalist committee, a decision that sparked more than two months of mass rallies which paralysed the city towards the end of last year.
Analysts warned that protesters would likely mobilise once more if the bill is passed in the coming months.
Student leaders have already mooted the idea of an "Occupy Legco" movement to take over the legislature if the bill goes through.
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"We are totally disappointed with the political reform package," said Joshua Wong, the teenage face of the protest movement.
He added that it was the "responsibility of the young generation" to oppose elections which stuck to Beijing's restrictions.
The small number of tents that have remained on a road next to the government headquarters since the end of last year's protests have swelled in recent weeks.
That committee would reflect the current make-up of the pro-Beijing election committee, which up until now has chosen the city's leader, she said.
"These proposals are in strict compliance with the Basic Law (Hong Kong's constitution) and the relevant decisions of (China's) Standing Committee of the National People's Congress," Lam said.
"At the same time they fully take into account the views expressed by various sectors of the community," she added.
"It is neither practicable nor realistic to expect that one package of proposals can meet the ideals cherished by different people," she said.
"The pan-democrats would like to condemn strongly the government," said Civic Party lawmaker Alan Leong, one of those who walked out.
"We will launch a campaign to oppose the proposal and we will ask the Hong Kong public to continue to seek true universal suffrage," he added.