Davies was accused of "picking on religious communities" after forcing the debate in the Commons last night.
Davies denied that he was singling out Muslims and insisted that it was a "fundamental right" for consumers to know what they are purchasing.
"It has not mushroomed out of nowhere. There is widespread customer demand that proper information is given so that people can make an informed choice," he said.
His call was rejected by all sides of the house.
"I support further labelling," Conservative MP Jonathan Djanogly told Davies.
"But does my honourable friend agree that it is wrong to look at religious slaughter in isolation from other forms of slaughter?
"Labelling could give information about how the animals lived—their housing, food and drug consumption. Why is he picking on religious communities in his new clause?"
Labour MP Yasmin Qureshi claimed studies had shown that halal slaughtering can actually be significantly less painful for animals than the more widespread method of stunning.
"A myth is being perpetuated that somehow kosher and halal methods, carried out as they should be, are more painful and cause more suffering to the animal, but that is incorrect," she told the House.
"The stunning method is probably more painful, so banning things or labelling based on 'humaneness' or whether animals are being treated properly is wrong.
She accused the press of targeting Muslim communities.
"The newspaper that is going on about halal meat does not talk about experimentation on animals, which is real cruelty. We know that it just wants to have a go at one particular group of people," she added.
Consumer affairs minister and Lib Dem MP Jenny Willott said any compulsory labelling of halal meat would hamper British business.
"We do not consider at this stage that regulation is the best approach.
"If there is to be compulsory labelling, we believe that this would best be done at a European level.
"That would be best for consumers and also ensure that we do not put our food industry at a competitive disadvantage."
This was the second time Davies has lost a bid to make labelling of halal meat compulsory.
Last year he lost by just three votes on a ten minute rule bill.
He said his defeats were "largely [due to] the politically correct brigade on the opposition benches."
Davies lost the vote by 381 votes to 17, but he gained the support of several of his party colleagues.
Two Labour MPs, Kate Hoey and Jim Fitzpatrick also backed his bid.
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