The reforms would strengthen a ban on firms from outside the European Economic Area controlling Polish broadcasters and has been denounced by the United States, one of Warsaw's top allies.
The Senate rejected the legislation by a vote of 53-37, with 3 abstentions.
The legislation is now expected to go back to the lower house of parliament, where the nationalist Law and Justice (PiS) government is struggling to command a thin majority and could try to overturn the Senate's rejection.
But, in a sign the PiS may be backing off amid a mounting international backlash, President Andrzej Duda, a PiS ally, has indicated that he may veto the bill even if it gets through the Sejm.
The PiS says the legislation is aimed at ensuring fair news coverage, accusing foreign outlets of an anti-government bias.
Critics say it is part of a broader effort to muzzle the media.
Since the party took office in 2015, Poland has dropped to 64th place from 18th on the World Media Freedom Index.
The broadcasting licence of TVN24, the news channel most likely to be affected by the legislation, expires on Sept. 26 but it is not clear whether it will be granted an extension if the bill passes.
TVN24's parent, TVN, is owned by the U.S.-based media group Discovery Inc via a firm registered in the Netherlands to get around a ban on non-European firms owning more than 49% of Polish media companies.
If their Polish license isn't renewed, TVN24 is likely to continue to operate on a Dutch license.
Discovery has said it will take legal action on grounds of discrimination if TVN24's licence is not renewed.
(Reporting by Joanna Plucinska and Anna Koper; Editing by John Stonestreet and Mark Porter)
Source: Reuters