"I can't describe my disappointment," he said.
" It's an incredibly sad day for public health in New Zealand and for the health of babies yet to be born."
He said research showed mandatory fortification could have reduced the incidences of babies born with neural tube defects such as spina bifida by more than 75 per cent, without any harmful effects to others.
While Mr Thurston and his supporters were "beside themselves with disappointment", industry groups have welcomed the decision.
Annette Campbell of the New Zealand Association of Bakers said retaining the voluntary regime was the right approach for New Zealand.
She said about 34 lines of packaged breads were now fortified and available to consumers.
"We look forward to continuing our work with the ministry towards increasing the amount of fortified breads available and providing all consumers with real choices."
The NZ Food & Grocery Council also supported the minister's decision.
"In our view this is the common sense way to treat this issue and preserve consumer choice without dosing every single loaf of bread," said council chief executive Katherine Rich.
She said the food industry supported the Government's aim of improving folate levels in women of child-bearing age but said it didn't make sense to expose everyone to increased folate levels to achieve that.
However, Mr Thurston expressed doubts about the effectiveness of a voluntary regime.
He said he would "continue to pummel politicians and decision makers" as the the human cost in giving up the fight would be too great.
"Industry has won the battle but it hasn't won the war."