Before Tuesday's vote, Pashinian had floored questions in the chamber where control has always been held by Sarksyan's Republican backers.
After days of protests, veteran leader Serzh Sarksyan stepped down as prime minister last week.
Between 30,000 and 40,000 opposition supporters spent the day peacefully rallying outside the parliament building to support Pashinian. The vote's outcome enraged many of them.
"It is very important to enhance the effectiveness of the mechanism of property declaration by officials, since now this mechanism gives them room for hiding information about property", Pashinyan said.
On the same day, as required by law, the government resigned. The crowd's mood was jubilant despite the setback, as a light show lit up the rally and people shined flashlights from their cellphones.
"We understand and accept the people's victory". "We are starting large-scale actions of civil disobedience tomorrow".
Pashinian had earlier warned that the country would be plunged into a political crisis if the ruling party failed to support his candidacy. "Get sober until it's too late, because your behaviour could cause a political tsunami". The Republican Party has dominated Armenian politics since 1999.
Baghdasarian and Pashinian both indicated that they would take part in negotiations before that vote.
SomeArmenians saw Sarksyan's bid for the prime minister's job as a cynical ploy to extend his grip on power.
Pashinyan began street protests against the current authorities on 13 April. Not a single Republican lawmaker appeared to have voted for him.
The opposition Yelk faction announced that their candidate for PM is Nikol Pashinyan. Some said Pashinyan does not have a program to offer the country.
Term limits forced him to leave, but lawmakers quickly elected him as prime minister in April, a move that came after legal changes that weakened the presidency's power while bolstering the prime minister's.
Vadz Ghazaryan, an IT professional who immigrated to Canada from Armenia in 2014, said the protests have transformed the political landscape in his homeland, giving people hope that the corrupt political system led by the Republican Party can finally be reformed. "Authorities will obviously want to secure guarantees of immunity from prosecution and seats in a new government".
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