"It (the NPC decision) leaves no room for us to fight for a genuinely democratic system, and we will begin our campaign for peaceful, non-violent struggle," said Joseph Cheng, the convenor of the Alliance for True Democracy, a coalition of groups advocating universal suffrage in Hong Kong.
"We want to tell the world we haven't given up. We will continue to fight," he said.
On the surface, the National People's Congress' decision is a breakthrough that endorses the framework for the first direct vote by a Chinese city to choose its leader. Beijing is already hailing it as a milestone in democratic reform.
Read MoreThousands join anti-Occupy rally in Hong Kong
However, by tightly curbing nominations for the 2017 leadership poll, some democrats said Beijing was pushing a Chinese-style version of "fake" democracy.
The NPC statement said all nominations would be carried out according to "democratic procedures" and each candidate would need "the endorsement of more than half" of a nominating committee that will be similar in composition to an existing 1,200-person election committee stacked with Beijing loyalists.
The proposed electoral framework will still have to be endorsed by two-thirds of Hong Kong's 70-seat legislature. With pro-democracy lawmakers holding more than a third of the seats, the proposal will likely be shelved.
Read MoreMacau 're-elects' new leader amid democratic rumblings
Senior Chinese officials have repeatedly warned activists against their "illegal" protests and say they won't back down.
Some key members of the pro-democracy movement, including media magnate Jimmy Lai, have also come under pressure in the run-up to the Chinese parliamentary decision.
On Friday, China also repeated its warning against foreign interference, saying it will not tolerate the use of Hong Kong "as a bridgehead to subvert and infiltrate the mainland".
The Occupy Central movement has not yet won broad support among Hong Kong's middle class, who are concerned about antagonizing China and disruptions to business, but strong measures by China or the Hong Kong police could change that.