CHICAGO - Gasps and tears greeted the announcement on Friday that Chicago had lost its bid to host the 2016 Summer Games, as the city went from favorite to also-ran in the multibillion-dollar Olympics sweepstakes.

This was Chicago's shot at coming out as a world-class city so it's deflating, said Kevin O'Hara, 48, who runs a financial trading firm in Chicago.

Chicago was the first city eliminated in the first round of voting by the International Olympic Committee, with rivals Rio de Janeiro, Madrid and Tokyo still standing.

I wanted to be part of what I thought would be history. It just goes to show that Chicago is still the Second City, or perhaps the fourth city after today, said Kevin Gross, 37, an attorney who had joined a crowd packed into a downtown plaza, making reference to the city's nickname The Second City.

Chicago, a city of 3 million people, had been a favorite on several wagering Web sites ahead of the International Olympic Committee's decision in Copenhagen.

Oh, how disappointing, said Judy Weniger, 63, a Chicago rooter visiting from Pennsylvania. No one expected this to happen. It makes you want to cry.

Chicago sent a huge delegation of former Olympic athletes, business leaders and politicians to lobby for the Games, capped by personal appeals by U.S. President Barack Obama and first lady Michelle Obama on behalf of their hometown.

Jaws dropped and tears welled up among those watching on giant television screens in the downtown Loop, with people shaking their heads and scattering quickly. Workers from a coffee shop handed out packages of dried coffee as early morning blue skies darkened and rain began to fall.

The taxpayers were not consulted about this, so the right decision was reached, said Tom Tresser, who led an anti-Olympics bid group called No Games Chicago and traveled to Copenhagen to do his own lobbying.

To marshal all this civic energy and all this money, it was not the right project for this city at this time, Tresser said by telephone.

I thought we were going to win this, said Chicago-based civil rights leader the Rev. Jesse Jackson, adding he was shocked by the rejection.

We send our 'A' team -- the president, the first lady making such a great presentation, and (TV talk show queen) Oprah (Winfrey) and the mayor and the governor. It just may be that we fought a great air war but this is a ground war struggle, Jackson said.

We're going to form the conga line right now, said Chicagoan Judy Brady, 64, who is retired and did not like that one venue would encroach on a bird sanctuary.

I'm speechless -- and delighted. Now the village elders can come home and take care of the kids being killed on our streets and focus on getting our schools in order, she said.

(Reporting by Ben Klayman, Jessica Wohl, Bradley Dorfman, James Kelleher; Writing by Andrew Stern; editing by Will Dunham)