The override vote failed 273 to 156, about 13 votes short of the two-thirds it takes to defeat a veto.
Now congressional leaders and Bush officials will try to find a compromise before the program expires in mid November.
CHIP provides insurance for children in families that are not eligible for the low income Medicaid program, but who can not afford private health plans.
As expected, Utah GOP Reps. Rob Bishop and Chris Cannon, continued their opposition, while Democrat Rep. Jim Matheson voted in favor of the override.
Matheson was the only Utah representative who spoke during today's debate, saying: "At a time when it is often tough to make progress on important issues, why would we want to turn our backs on our kids and stop this progress in its tracks."
Cannon has never looked at CHIP as progress. He considers it a program that goes where the private market should prevail.
The Senate is believed to have the votes needed to override the veto, but that vote won't take place because House Republicans joined with Bush to criticize the bill's scope and cost.
The bipartisan bill, which is pushed by Sen. Orrin Hatch, R-Utah, would have more than doubled the cost of the program and covered an additional 4 million children.
Bush wants a more modest program that only seeks to enroll the 500,000 children who are currently eligible.
Despite this rift, President Bush has said: "I'm confident we can work out our differences."
He has asked Mike Leavitt, secretary of the Health and Human Services Department and former Utah governor, to lead the negotiations.