NICE said the drug provides 'little additional benefit over existing drugs' and due to its high cost does not represent value for money.
Asthma UK said the drug had 'transformed people's lives' and had been approved for use by the Scottish Medicines Consortium.
But NICE said that only a small number of 1.1 million children with asthma in the UK would be eligible for treatment.
Omalizumab is used to treat severe, allergic asthma, where patients have an oversensitive immune system.
Gloucestershire GP Dr Mike Thomas, chief medical adviser to Asthma UK, said he was 'very disappointed' by the decision.
'Those with conditions like severe asthma are held back by crippling daily symptoms, endless trips to hospital and huge amounts of time off school.
'(Omalizumab) could provide a lifeline for some of these children, giving them an opportunity to experience a normal childhood and take part in activities that have been difficult or even impossible.
'We therefore urge NICE to reconsider this decision as a matter of priority.'