New Jersey, which placed 15th, could have received up to $60 million and Pennsylvania, at 16th, up to $70 million, according to a federal Education Department spokesman.
"Nothing is more important than getting our babies off to a good start," Education Secretary Arne Duncan said.
New Jersey and Pennsylvania both said they remained committed to furthering early-childhood education in their states.
"We are disappointed that Pennsylvania was not selected as a grant recipient," said Tim Eller, Pennsylvania Education Department spokesman. "The commonwealth remains committed to early education initiatives to have a positive impact on our youngest learners.
New Jersey acting Education Commissioner Christopher Cerf said applying for the award "strengthened collaboration across state agencies and led to the development of a comprehensive plan that will serve as a road map for the future of early-childhood education in New Jersey."
The two states lost out in two previous Race to the Top contest rounds for reform-supporting grants.
They are among seven states that have applied for a share of $200 million in yet another Race to the Top round. New Jersey and Pennsylvania are each eligible for up to $28 million.
The money is intended to support a reform agenda as specified by the Obama administration to advance education in science, technology, engineering, and mathematics. The winners are expected to be announced this month, the federal education spokesman said.
Contact staff writer Rita Giordano at 856-779-3841, firstname.lastname@example.org or on Twitter @ritagiordano.
This article contains information from the Associated Press.