• Nicola Sturgeon failed in a last-ditch bid to have minimum pricing made law
MSPs voted 76-49 against the policy, which was part of the wider Alcohol Bill being determined at Holyrood.
Health Secretary Nicola Sturgeon said rejecting the plan was a sad day for Parliament and accused her opponents of crude party politics.
The Scottish Government wanted to impose a 45p minimum price per unit of alcohol and had the wide support of health professionals and police.
But Labour, Liberal Democrats and the Conservatives combined to reject the SNP policy.
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In a last-ditch appeal, Ms Sturgeon said alcohol costs Scotland 3.5 billion a year and can make lives a "misery".
She said: "When we have the opportunity to save not just money but lives, then we have a duty to listen and to act.
"That is exactly what people outside this Parliament want us to do - people who know what they're talking about. Doctors, nurses, the police, public health experts, children's charities, churches, key players in the alcohol industry, and growing numbers in the population all believe that this is a policy whose time has come.
"And yet inside this Parliament we have an obstinate refusal to listen - a mentality that says 'we are right and everyone else is wrong'."
Ms Sturgeon rounded on her Labour opponents, saying the arguments against the proposals have been answered.
The plan is legal, will not disproportionately hit the poor and does not favour supermarkets, she said.
Ms Sturgeon, who is also deputy first minister, said critics have failed to come up with an alternative in an "abdication of responsibility".
She said the worst argument was that there is no evidence to suggest the policy would work.
The Government has faced criticism for relying on a study by Sheffield University to back much of the plan.
A "sunset clause" was offered as a compromise so the policy could be scrapped if it proves ineffective. In a bizarre twist, that clause was later approved in a 63-61 vote despite the rejection of minimum pricing.
Ms Sturgeon said: "The truth is that, for Labour, this policy really only has one fatal flaw - and that is that it is proposed by the SNP.
"It is pathetic, and Labour - a party with such a proud record on public health - should be deeply ashamed of itself today."
Despite the focus on the controversial policy, the Bill also provides for a ban on discount deals, such as two-for-one on bottles of wine.
It aims to ban "irresponsible" drinks promotions, restrict advertising of alcohol around premises, a requirement for age verification and a new tax that could be imposed on licence holders.
The tax, called a social responsibility levy, aims to ensure retailers and licensed premises, such as nightclubs, contribute to the wider cost of their activities to the community.
Responding to Ms Sturgeon's speech, Labour health spokeswoman Jackie Baillie said: "It is disappointing that so much of the debate has been dominated by one issue, and that issue is minimum unit pricing."