International Olympic Committee (IOC) members meeting in Buenos Aires eliminated Madrid, bidding for the third time in a row, from the first round of voting and awarded the Games to Tokyo over Istanbul.
Madrid's presentation to the IOC has been widely ridiculed, with Mayor Ana Botella, the wife of former conservative Prime Minister Jose Maria Aznar, bearing the brunt of the criticism after she mangled comments in English at a news conference.
"I think that for the moment the Olympic race has given us all the benefits we can expect from it in the next few years," Botella said.
"I believe, therefore, that Madrid should not seek to host the 2024 Games," she added.
As well as the disappointing presentation, various other theories have been put forward as to why Madrid failed, including their decision to present their bid as the "austerity option" and a perception that Spain is soft on doping.
Madrid's failed bid was the Spanish capital's fourth in total after the city also lost out to Munich for the right to host the 1972 Games.