The project, which had an estimated cost of $75 million, was struck down by a 15-3 vote.
Gatineau Mayor Maxime Pedneaud-Jobin said the plan to build a new home for the Gatineau Olympiques hockey team was not a priority for taxpayer money.
The Olympiques, who play in the Quebec Major Junior Hockey League, have played in front of fans at the Robert Guertin Centre for more than half a century. The building was also recently renovated to meet league standards for the number of seats.
On Tuesday, Pedneaud-Jobin also instructed city council to vote for the building's demolition in 2018, which would force the Olympiques to find a new home on its own.
Olympiques management has said, over the past eight years, it believed the city's arena project was moving ahead.
In 2011, the city dropped plans to build a brand new arena in its downtown core.