Virgin Orbit said an 'anomaly' stopped its rocket from reaching orbit.
A crowd had gathered in the coastal town of Newquay in southwest England to cheer on the historic mission.
In the so-called "horizontal launch", a modified Boeing 747 named "Cosmic Girl" carried Virgin's LauncherOne rocket under its wing, before releasing it over the Atlantic Ocean.
Virgin Orbit, part-owned by British billionaire Richard Branson, also livestreamed the mission.
But then the company's Director of Systems Engineering and Verification, Christopher Relf, delivered the bad news:
"It appears that LauncherOne has suffered an anomaly, which will prevent us from reaching orbit. We are looking at the information and data that we have gotten."
The company later said the "Cosmic Girl" carrier and its crew had safely returned to Newquay spaceport, but gave no further detail on the status of the rocket and its payload of nine satellites.
The UK Space Agency's Commercial Space Director Matt Archer said a first stage burn had taken the rocket into space.
But the second stage engine had a "technical anomaly and didn't reach the required orbit."
Archer said the British government, Virgin Orbit and other parties involved will investigate the failure of the mission -- which was the company's first outside its U.S. base.
He called it "disappointing", but added, "we will continue to press on and we will get there in the end."
