Voters decisively rejected Lib Dem-backed proposals to change the way MPs are elected while the party lost around 700 councillors in England and haemorrhaged support to the Scottish National Party (SNP) north of the border.
The deputy prime minister admitted the results were “a bitter blow” for Lib Dems, but insisted his party would “pick ourselves up, dust ourselves off and move on”.
Despite some calls from Tory backbenchers for the coalition to be brought to an early end, Mr Cameron made clear it will run its full five-year term.
Speaking after the Alternative Vote (AV) result became clear, the prime minister accepted the referendum campaign, which saw vitriolic exchanges between cabinet ministers on opposing sides of the debate, had been “difficult” for the government.
He said: “The coalition agreement set out that we were going to ask the British people a very straightforward question and they have given the most clear and resounding answer.
“I believe that what the British people want us to do now is to provide a good, strong, decisive government in the long-term national interest of this country, Conservatives and Liberal Democrats working together.”
Responding to the AV vote, Clegg said: “This is a bitter blow for all those people — like me — who believe in the need for political reform.
“But the answer is clear and the wider job of the Government and the Liberal Democrats in government will continue”.
After 438 of the 440 referendum results had been declared, some 12.5 million people (68.4%) voted to keep the first-past-the-post system against 5.8 million (31.6%) backing AV.
Results from 270 English councils showed Labour gained 799 seats and 26 councils, while Conservatives increased their tally of councillors by 83 and the Lib Dems lost 698.
Meanwhile, Scotland moved closer to a vote on independence after the party of nationalist first minister Alex Salmond secured a historic majority Friday in elections for the Edinburgh parliament.
In the first overall majority for any party since the parliament opened in 1999, the SNP battered the once dominant Labour Party to win 69 seats in the devolved 129-seat Holyrood assembly.
Salmond pledged to hold a referendum on Scottish independence within the next four years, something he could not deliver in his first term as the SNP were outnumbered by unionists.