A meeting on Wednesday turned down a devolution partnership with Portsmouth and Southampton, which supporters said could secure £900m from the government.
Portsmouth leader Donna Jones said the vote put the deal in jeopardy, although she was confident it would be reversed.
Isle of Wight council leader Jonathan Bacon said his executive would make a final decision on Monday.
If all three authorities agreed, an application would be submitted to the government.
Mr Bacon, an independent, said a devolution deal was the only way to address the council's "perilous financial state", following budget cuts of more than £50m over the last five years.
He said Wednesday's vote had "probably shot our credibility with the government".
Opposition Conservative leader Dave Stewart, whose group voted against the bid, said: "There has been little support for it amongst residents, and there were some very significant question marks over it."
Isle of Wight Conservative MP Andrew Turner had warned the island's needs "could easily be over-ridden" by Southampton and Portsmouth, and the potential £900m grant over 30 years was an "estimate" not a "government promise".
Mr Bacon said the government had confirmed the money was "definitely on the table".
He said the independent-controlled executive was in a "difficult position" ahead of its vote on Monday.
On Wednesday, Southampton joined Portsmouth in agreeing to be part of the bid.
Under the deal, the councils would leave the current system of government funding in exchange for keeping business rates of about £210m a year.
The three councils would continue as separate entities and retain their existing powers, but they would also be equal members on a board led by an elected mayor.
The Isle of Wight council has voted against plans to form a combined authority for the Solent area.