Euro MPs have blocked changes to food labels that would have allowed claims such as "now contains 15% less sugar".
Such claims for reduced sugar, fat or salt would "mislead consumers", said the parliament's chief negotiator on food labels, Renate Sommer MEP.
MEPs also said the draft legislation would not go far enough to encourage firms to develop healthier foods. The EU Commission must now redraft it.
Currently a "reduced" label must mean at least 30% less of an ingredient.
The European consumer organisation BEUC welcomed the MEPs' vote on Thursday, saying "consumers do not need to be confronted with yet another nutrition claim, especially one which is misleading and adds to confusion...
"What they need is for industry to put public health first and step up their reformulation efforts".
The industry lobby group FoodDrinkEurope, which includes 18 major food and drink companies, voiced dismay.
It argued that consumers "will not be informed of important reformulations to foods so that they can make an informed food choice".
It said the label would have enabled producers to "communicate incremental nutrition changes".