Bernstein has been viewed as a force for good since he replaced Lord Triesman in December 2010, taking the bold decision to axe John Terry as England skipper as well as launching a new players' code of conduct earlier this week.
Yet he still has not managed to get the FA Council to amend their statutes to allow him to continue in his job beyond next spring.
"I respect the decision and I remain committed to fulfilling my responsibilities and to building on what we have achieved over the past two years," said Bernstein.
"Next year is a significant one in the FA's history and I look forward to leading the organisation in the months ahead."
The news will be greeted with dismay by senior figures at Wembley. Bernstein has worked closely with fellow Club England board members Alex Horne, Sir Trevor Brooking and Adrian Bevington to streamline the organisation of the England team and improve relations with FIFA in the wake of the abysmal World Cup bid episode.
Although he proved he was not scared of the world governing body, leading the calls for FIFA reform and calling for the presidential election to be cancelled, Bernstein has won admirers for his sensible approach to the job.
He remained defiant in his dealings with the issue of Terry's captaincy, even though it put him in direct confrontation with Fabio Capello, who subsequently resigned.
Now Bernstein will be forced to leave in the middle of the FA's 150th anniversary celebrations, which seems a bizarre situation for the governing body to find themselves in.
It is also a significant snub for the FA Board, who hoped they held enough influence within the organisation to sway Wednesday's vote.
"The Board had asked the chairman to continue beyond next May until summer 2014 and it subsequently put forward the proposal to today's FA Council meeting," read an FA statement.
"Despite strong support for the chairman's ongoing leadership, in a close vote the Council voted against the amendment on the basis that it would be inappropriate to change known and agreed rules on an individual basis."
It is believed former Liverpool director Noel White, a former chairman of the FA's international committee, led the resistance to the Bernstein bandwagon.
He was amongst those who were concerned about the FA Council just becoming a rubber-stamping body.
The move may create tensions though, with plenty within the FA believing the
organisation still needs to shed the staid image so many people have of it.
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