Mayor Joe Yochum says the $5.5 million Main Street reconstruction project was designed to widen and resurface Main Street and add curbs and sidewalks.
He tells the Vincennes Sun-Commercial that the city's track record hurt its application.
The city received money to rebuild Second Street years ago, but the work isn't scheduled to start until late 2016. A Riverwalk project with state funding also has been delayed.
City leaders say they're disappointed but hope to reapply for the Main Street grant in April.
Nearly 70 percent of the students in the Vincennes Community School Corp. use Main Street.