Mayor Rob Ford — an outspoken proponent of the project — called the issue "essentially dead" last week and cancelled a special meeting to consider the proposal.
But a group of councillors signed a petition to put the debate back on Tuesday's agenda.
After debating the issue, council voted 40-4 against the proposal — essentially putting an end to the possibility of a downtown casino in the near future.
As he headed into the session, Ford evaded a throng of media seeking further comment on allegations that he was recorded on video appearing to smoke crack cocaine, which he last week called "ridiculous."
He spoke only on the casino issue and blamed Ontario's governing Liberals for killing the proposal by failing to provide enough financial incentive for the city to make it worthwhile.
"Hosting a casino in Toronto that does little to address Toronto's financial needs and simply makes the provincial government richer is not in the best interests of Toronto," Ford said during the debate.
"The province wants money for nothing."
The mayor had been pushing for the casino, saying it would result in 10,000 jobs.
But last week, the province said Toronto would receive $53 million a year for hosting such a facility, not the $100 million Toronto was hoping for, prompting Ford to declare the casino idea dead.
He lashed out at Premier Kathleen Wynne, saying she foisted the divisive casino debate on the city to avoid any political risk.
"They've asked the council to battle it out so the premier doesn't get her hands dirty," Ford said.
Wynne simply doesn't want a casino in Toronto, he added.
"No matter what deal we strike with the province, it can only work if we have a willing partner at Queen's Park," Ford said.
"And it's becoming crystal clear that this will never happen under the leadership of Premier Wynne."
But Wynne said she's maintained from the beginning that every municipality should be treated the same when it comes to revenue sharing from casinos.
The decision to host a casino is "rightly in the hands of municipalities," she said.
"I don't think this is a personal debate between me and any other politician in the province," Wynne said.
"I think this is about a principle — which is, municipalities should be able to make this decision."
Wynne asked Ontario Lottery and Gaming Corp. to revise their funding formula in March after reports surfaced it was offering a special deal to Toronto that would see the city collect $100 million annually in hosting fees.
But the government's refusal to divulge the formula last week sparked an angry Ford to denounce the Liberals for spoiling plans for a casino.
Wynne fired OLG chairman Paul Godfrey later that day, prompting the entire board of directors to resign.
Godfrey has said he wasn't given a reason for his dismissal, but Wynne told him the government was "going in a different direction."
Wynne said Tuesday that there were "critical" points of divergence.
They included the "fairness" of a casino formula to ensure Toronto didn't get a special deal, she said. They also differed on the integration of the horse-racing industry — which was devastated after OLG ended the slots-at-racetracks program — into the corporation's modernization strategy.Suggest a correction