The governor of Arizona has vetoed a controversial bill that would have let businesses refuse to serve gay and lesbian people for religious reasons.

Republican Jan Brewer said the measure was "broadly worded and could result in unintended and negative consequences".

The bill, passed by politicians last week, had provoked anger from gay rights campaigners around the US who said the southwestern state was "on the wrong side of history".

Supporters, however, claimed the bill would have protected the religious freedom of business owners.

"Today's veto of SB 1062 marks a sad day for Arizonans who cherish and understand religious liberty," said Cathi Herrod, president of the Center for Arizona Policy.

"SB 1062 passed the legislature for one reason only: to guarantee that all Arizonans would be free to live and work according to their faith.

"Opponents were desperate to distort this bill rather than debate the merits. Essentially, they succeeded in getting a veto of a bill that does not even exist."

Ms Brewer said she understood "that long held norms about marriage and family are being challenged as never before. Our society is undergoing many dramatic changes".

"However, I sincerely believe that Senate Bill 1062 has a potential to create more problems than it purports to solve (and) could divide in Arizona in ways we cannot even imagine and no one would ever want."

While the measure "does not address a specific or present concern related to religious liberty in Arizona," Ms Brewer claimed, it "could result in unintended and negative consequences".

"Religious liberty is a core American and Arizona value," she said.

"So is non-discrimination. Let's turn the ugliness of the debate over (the bill) into a renewed search for greater respect and understanding among all Arizonans and Americans."

Critics of the measure, who gathered to hear the announcement, erupted into applause and dancing when Ms Brewer announced her veto.

"Discrimination has no place in Arizona, or anywhere else," said Alessandra Soler, head of the American Civil Liberties Union's Arizona branch.

"We're grateful that the governor has stopped this disgraceful law from taking effect and that Arizona will remain open for business to everyone."

Republican Senator John McCain welcomed the decision.

"I hope that we can now move on from this controversy and assure the American people that everyone is welcome to live, work and enjoy our beautiful state of Arizona," he said.