The National Capital Planning Commission said that it disapproves of the current design by Gehry, singling out the design's call for large, metal tapestries and the effect that those tapestries would have on the view to and from Capitol Hill.
The commission, which voted 7-3 to reject the design, also requested that the memorial's backers revise the design to better accommodate pedestrian traffic, public lighting and other factors.
The commission is a group of individuals -- including three appointed by the president -- who represent federal and local constituencies with a stake in planning for the nation's capital.
Thursday's rejection is the latest bump in the road for the memorial, which has faced numerous political setbacks in recent years, including a call from key members of the Eisenhower family to do away with Gehry's design.
The estimated price tag for the memorial stands at more than $100 million, with some funding expected to come from the federal government.
Gehry's tapestries have long been a point of contention for their depiction of the 34th president's childhood in Kansas. Descendants of the late president have expressed the wish that the memorial focus more on his political and military accomplishments.