We use recent COBE observational limits on departures of the spectrum of the cosmic microwave background (CMB) from a pure blackbody curve to constrain models of galaxy formation. The damping of adiabatic density perturbations at high redshifts (z approximately 10(5)) injects energy into the primordial plasma which cannot be thermalized and therefore distorts the CMB spectrum. We find that we can eliminate flat (OMEGA-0 = 1) baryon-dominated models with power-law primordial fluctuations having n > 4 and open (OMEGA-0 = 0.1) baryonic models with n > 1. The results complement other constraints from microwave background temperature anisotropies, nucleosynthesis and galaxy clustering and, taken together, they suggest very strongly that there is either a preponderance of non-baryonic dark matter, a non-zero cosmological constant, a source of isocurvature (rather than adiabatic) fluctuations in the early Universe or some other source of density perturbations, such as non-superconducting cosmic strings.