Under Kyrgyzstan's current legislation, journalists convicted of spreading ideas deemed extremist face up to three years in jail. The proposed changes would have increased prison terms to between five and 10 years.
The Kyrgyz nongovernmental organization Voice of Freedom welcomed the parliament's decision to reject the projected legal package.
Other NGOs had warned against the government's initiative, saying it would have hurt press freedom.
Justice Minister Marat Kaiypov criticized lawmakers for rejecting the proposals, saying they wrongly interpreted them as an attempt to muzzle the opposition.
Kyrgyz government officials say toughening the existing media law is necessary because the country is facing a resurgence of religious militancy.