The Derby-based firm had hoped to win a multimillion-pound order for 1,200 new train carriages as part of the £6 billion Thameslink main line rail project.
But the Government decided last month to make German company Siemens the Thameslink preferred bidder, prompting today's job-loss announcement affecting 446 permanent staff at Derby and 983 temporary staff.
Bombardier said it was "very disappointed" about the redundancies and said it was "a sad time" for Derby where rail work dates back to 1840 and where 3,000 people work.
One Bombardier worker at Derby said he felt "let down and betrayed", while transport unions said the decision in favour of Siemens was "a scandal" and "misguided".
Labour said it was not too late for the Government to review the Thameslink contract, which will see the new carriages built in Germany rather than at Derby.
But Transport Secretary Philip Hammond said altering the Siemens decision was "not an option" and that Bombardier had informed the Department for Transport in May that it would have to make more than 1,000 redundancies regardless of winning the Thameslink contract.
Mr Hammond added that under European procurement law the Government had had no choice but to announce Siemens as the preferred bidder.
He said he and Business Secretary Vince Cable had written to the Prime Minister "on the issue of whether the UK is making the best use of the application of EU procurement rules".
Bombardier had been counting on getting the Thameslink order, having recently lost out to Hitachi of Japan for a big inter-city express train contract.
Workers at Derby are now completing orders for London Underground carriages and for diesel trains for the London Midland main line train company.
Most of this work will be completed by the end of September this year.
Francis Paonessa, president of Bombardier's passengers division for the UK, said: "The culmination and successful delivery of these projects and the loss of the Thameslink contract, which would have secured workload at this site, means that it is inevitable that we must adjust capacity in line with economic reality."
He went on: "We regret this outcome but without new orders we cannot maintain the current level of employment and activity at Derby."
Speaking at the entrance to the Derby site today, Colin Walton, chairman of Bombardier Transportation in the UK, said he was "very disappointed" about announcing the redundancies.
He said it was a blow to UK manufacturing and added: "Obviously we're still trying to rationalise the reasons why and clearly it does seem to go against what we're told about how manufacturing is important to the UK and it's a rebalancing of the economy."
Also speaking at the gates to Bombardier today, Darren Barber, an electrician and union representative at the plant, said: "It's a massive blow. I don't feel angry but I do feel let down. I feel betrayed, I feel sad and not just for myself - that's for everybody."
Bob Crow, general secretary of the RMT transport union, said: "It's a scandal that the Government are colluding with the EU in a policy of industrial vandalism that would wipe out train building in the nation that gave the railways to the world."
Len McCluskey, general secretary of the Unite union, said: "The situation at Bombardier has reached crisis point. The Government must now act swiftly and decisively to save Britain's last train manufacturer.
"The dire consequences of the Government's misguided decision to exclude Bombardier from the contract to build carriages for the Thameslink project is now becoming a reality."
Gerry Doherty, leader of the TSSA rail union, said: "Ministers must abandon their role as Pontius Pilate and stop standing idly by while train-making slowly bleeds to death in the UK.
"They owe it to British manufacturing in general, and the people of Derby in particular, to reverse their decision to award this huge contract to Siemens of Germany."
Shadow transport secretary Maria Eagle said: "This is a black day for the only company which designs, builds, maintains and exports trains from the UK.
"The loss of the Thameslink contract has dealt a body blow to the UK rail manufacturing sector from which it is not clear it can recover."
She went on: "There is a long way to go in this procurement process which has only reached preferred bidder stage. It is unbelievable that the Transport Secretary has already washed his hands of the situation and is claiming that there is nothing he can do except write to the Prime Minister about his own decision."
Ms Eagle and shadow business secretary John Denham have written to the Prime Minister urging him to review the decision.
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