First Glasgow said last week that the action by Unite members had been withdrawn after talks between the company and the union over a 1.2% pay award, but members have rejected the deal and a new ballot on strike action will be held.
Further talks between First and the union have also been agreed.
First Glasgow said it was "surprised and disappointed" that engineers rejected the pay offer.
Fiona Kerr, managing director, said: "The 1.2% offer was one that Unite themselves tabled when they were already aware of executive pay at plc board level, and to which after discussion we agreed,"
"Indeed we had proposed a number of options including offering the security of a pay increase for each of the next two years, but these were rejected by Unite the union in favour of recommending the offer that was then tabled with our employees.
"We are operating in a very challenging market in Glasgow, put under extra pressure by cuts in funding and increasing costs. In the last two years we have taken hard decisions to close a depot and to implement a two- year wage freeze for many of our drivers. We are simply not prepared to fund a pay award for engineers by asking customers to pay higher fares, or to jeopardise long term job security."
The ballot for industrial action comes only weeks ahead of the opening ceremony for Glasgow 2014 Commonwealth Games.
Ms Kerr added: "First Glasgow remains fully committed to a successful Games."
It is understood talks are continuing in a separate dispute with Glasgow Subway operators, Strathclyde Partnership for Transport, over extra pay for Unite staff during the Games.