A crunch meeting on Wednesday saw National Association of Head Teachers delegates reject their executive's decision to stay in the deal by 10,828 votes to 9,446.
David Hart, general secretary, told members that the decision meant the union's immediate withdrawal from joint national discussions on both implementation of the agreement and teacher pay and conditions. It represents a massive blow to the Government's "social partnership" with school staff, unions and employers.
Mr Hart said: "I am obviously very disappointed. I think this vote neuters the NAHT when it comes to negotiating at a national level.
"But members have decided that the Government has not put enough money into the agreement and don't see any prospect of it doing so in the next few years. They wanted to give the Government a bloody nose."
The withdrawal will not release NAHT members from their statutory responsibilities to implement the final phase of the deal.
At the Association of Teachers and Lecturers conference in Torquay next Wednesday, Brian Waggett, president, will condemn heads who do not give teachers 10 per cent planning, preparation and assessment time in September as "morally bankrupt".
The Department for Education and Skills said it regretted the NAHT decision.