Ignoring personal pleas from the President, the upper house decided that Yuri Skuratov - whose officials are investigating allegations of bribe- taking among the Kremlin's inner circle - should stay as prosecutor general.
In doing so, the Federation Council proved unmoved by an unprecedented scandal whose chief exhibit is a secretly recorded video in which the lawyer is caught in steamy scenes with two prostitutes.
As Mr Yeltsin has been campaigning relentlessly for Mr Skuratov's removal, the vote means parliament has again thrown down a gauntlet at the Kremlin, which the President - more active and bullish today than he has been for months - will be sorely tempted to take up.
Last month the Federation Council, which is made up of regional leaders, refused to accept Mr Skuratov's resignation by 142 votes to six. Under the law, they have the final say. Yesterday the vote was 79 to 61 - a swing that can be attributed to Mr Yeltsin's attempts to woo its members with promises of more regional autonomy.
The President had argued that Mr Skuratov should be fired on moral grounds, as his frolickings - a clip of which found its way on to national television - are unsuitable for the nation's top prosecutor, who is responsible for fighting crime.
But Mr Yeltsin's foes allege darker motives. They point to the prosecutor's investigations into corruption in the upper echelons of government and the Central Bank during the era of largely fruitless market reforms. These investigations include an inquiry into allegations that top Kremlin officials took bribes from a Swiss construction company in return for building contracts. The driving forces behind these investigations are deemed to be Mr Yeltsin's political enemies, some of whom wield influence in the administration of Yevgeny Primakov, the Prime Minister.
The upper house's challenge is a setback for the President as it cuts across his efforts at a political comeback. In the past eight months his power base has been corroded by illness and by his failure to secure parliament's approval for his first choice of prime minister, Viktor Chernomyrdin, last September. Mr Primakov was always the second choice.
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