China says Hong Kong's government must petition Beijing if it wants to make any changes to its electoral laws.
The National People's Congress Standing Committee, made the decision in an interpretation of the Hong Kong constitution. The announcement came from Qiao Xiaoyang, deputy secretary-general of the NPC Standing Committee.
"The right to amend the law belongs to the National People's Congress," he said.
Democracy advocates see the ruling as Beijing's clamping down on the development of democracy in the territory, which Britain returned to Chinese control in 1997.
The constitution, known as the Basic Law, devised by China and Britain prior to the change in sovereignty, aims to establish a system in which Hong Kong residents can directly elect their leader. That right is not shared by their countrymen on the Chinese mainland.
In its interpretation, the NPC Standing Committee said local governments have no fixed power. It said all powers of local governments derive from the authorization of the central authorities.
Some Hong Kong activists accused the Chinese government of violating the so-called "one country, two systems" arrangement in which China promised to respect Hong Kong's autonomy for at least 50 years.
Peaceful demonstrations continued as the Beijing announcement was being read. Organizers say they plan to schedule other rallies in the months to come.
Many political analysts say China's move to control when Hong Kong changes its electoral system were prompted in part by a series of pro-democracy demonstrations held in the city since last year. Beijing has made it clear it does not want Hong Kong to challenge the Communist Party's rule of China or to be seen as a base for subversion.
Currently, a Beijing-appointed committee selects Hong Kong's leader. Less than half the legislature is directly elected.