Falcon 1, a rocket built by El Segundo-based SpaceX, became the first privately funded spacecraft to achieve orbital height, reaching an altitude of 190 miles Tuesday before a control problem sent the vehicle hurtling back to Earth.
The liquid oxygen-kerosene fueled rocket performed flawlessly for several minutes after its launch about 6:15 p.m. PDT from Kwajalein Atoll in the South Pacific.
"Come on baby," a ground controller said as the 70-foot rocket rose from its pad.
The first stage separated as planned, and the second stage ignited on cue. Then, an on-board camera recorded violent vibrations in the second-stage engine, followed by a loss of video.
Elon Musk, the founder of SpaceX, also known as Space Exploration Technologies Corp., said the rocket managed to complete a half-orbit before going out of control.
"This is the farthest any private liquid fuel rocket ever got in history," Musk said later in a phone interview.
Even though the rocket failed to achieve the desired orbit, he said it had overcome 90% of the difficulties of reaching space.
"It wasn't a perfect day," Musk said. "But it was a good day."
SpaceX engineers were trying to figure out the exact problem late Tuesday.
Musk, a South African immigrant who made an estimated $300 million from Internet ventures that included the PayPal on-line billing system, has pledged $100 million of his money to create a low-cost competitor to the big satellite-launch firms.
He has several launch systems on the drawing board, including the nine-engine Falcon 9, designed to carry a crew capsule named Dragon.
His first launch effort, another two-stage Falcon 1, failed to reach orbit last March.
Over the last months, Musk, who believes he can cut the cost of space transport by a factor of 10, redesigned the rocket, adding dozens of new safety and monitoring mechanisms.
Tuesday's $7-million launch was a test for the Defense Department.
SpaceX said it had already booked $400 million in orders from both the Department of Defense and other satellite companies, including two scheduled this year.