A full 54 percent of voters in the canton came out against paying up to 100 million Swiss francs (86 million euros) to host the games.
With Valais out of the picture, six cities remain candidates to host the 2026 Olympics, with the winning bid set to be announced in September 2019.
The vote marks the latest in a series of failed attempts by Valais authorities over the past half century to convince people they should host the Olympics.
The question was put to a vote in 1968, 1976, 2002 and 2006, but was turned down each time.
Sion 2026 was the latest attempt to bring the Olympic Games to Switzerland for the first time since St Moritz in 1948.
Government offered one billion
Switzerland’s federal government had said it would help chip in almost one billion euros to cover excess costs.
But citizens in the largest towns in the region, including Sion which would have been the host city, rejected the plan.
Voters in some of the largest ski areas in the canton, including Zermatt and Nendaz, also voted against.
Only in Crans-Montana and Saas-Fee did votersapprove the bid.
The overall turnout in the canton was 62.6 percent.
Social spending concerns
Those opposed to the Sion 2026 bid argued that Valais is a financially weak canton in the Swiss Alps and organising the games would put too much financial stress on its coffers, even with federal government help.
They said the canton's coffers would be better allocated to roads, hospitals and social services.
Supporters of Sion hosting the games said the Olympics would have given the region more visibility, develop tourism and generate momentum.
The Swiss Tourism Federation issued a statement regretting the decision, saying that the games would have put the spotlight on Switzerland, creating thousands of jobs and turnover of around five billion Swiss francs (five billion euros)
The International Olympic Committee will announce the host city in September 2019 from six remaining candidate cities for the that were also vying for the 2026 games Calgary (Canada), Graz (Austria), the Swedish capital Stockholm, Erzurum (Turkey), Japan's Sapporo and an Italian bid that joins Cortina d'Ampezzo, Milan and Turin.