The vital vote focused on the proposed £140m plan - backed by £50m from businessman Sir Ian Wood - to transform the historic Union Terrace Gardens.
In a referendum earlier this year, there were 45,301 votes in favour with 41,175 votes against.
New proposals from the Independent Alliance Group were backed by 22, with 20 against and one abstention.
Improvements to Union Terrace Gardens, and landmark buildings, are instead proposed.
There were heated exchanged afterwards between some business leaders who supported the City Garden Project and councillors who voted against it.
Sir Ian's £50m offer has now been withdrawn. He said he was dismayed.
Callum McCaig, leader of SNP group, had called for the City Garden Project to be backed.
He said he was "bitterly disappointed" at the decision.
Conservative Alan Donnelly said the amendment was an "almighty fudge".
However, Mike Shepherd, chairman of Friends of Union Terrace Gardens, said: "There is no doubt that our councillors made the correct decision.
"This is the end of the City Garden Project debacle.
"Union Terrace Gardens is at the heart of our city. Let's nurture them with the care and attention they deserve. We can restore them to a place of pride and glory. Let's go ahead and do it."
The abstention was from Liberal Democrat Ian Yuill.
Various delegations had addressed the full meeting of Aberdeen City Council during the day.
One of the first to speak among earlier delegations was Leo Koot, managing director of oil firm TAQA Bratani, who said Union Terrace Gardens was a "dark hole".
However, that claim was contested by Iain Richardson, from Common Good Aberdeen.
Prominent Aberdeen hotelier Stewart Spence said the city needed to attract tourists, and required more than a spruce up.
Dan McCroskrie, speaking on behalf of the young people who support the scheme, said it was a once-in-a-lifetime opportunity which would help attract more young people into the city.
The cost of the winning Granite Web design was £140m.
The council administration's senior coalition partner, Labour, had vowed to scrap the scheme.

At least two overcrowded boats - with many women and children on board - were towed by local fishermen to the shores of Aceh province on Sunday.
Myanmar - also known as Burma - refuses to recognise Rohingya as citizens.
Hundreds of thousands have fled persecution in recent years, often through Thailand but also by sea.
Indonesian authorities and aid agencies believe the rescued group had been at sea for about a week.
They may have been trying to reach Malaysia, said Steve Hamilton of the International Organisation for Migration.
He said on Sunday that four boats in total were thought to have come ashore.
"People thought they were in Malaysia, it [turned out] they were in Indonesia. They were left behind by the smugglers."
Aceh provincial rescue chief Budiawan told AFP news agency on Sunday: "We received a report from fishermen this morning that there were boat people stranded."
"We despatched teams there and evacuated 469 migrants who are Rohingya from Myanmar and Bangladeshis. So far, all of them are safe."
North Aceh police chief Achmadi said at least 50 of the rescued people were taken to hospital.
"In general, they were suffering from starvation and many were very thin."
One migrant, Rashid Ahmed, told the Associated Press he was a Rohingya and had left Myanmar's Rakhine state three months ago with his son.
"We had nothing to eat. All we could do was pray," he said.
Rohingya Muslims have been fleeing sectarian violence in Myanmar for many years.
In December, the UN passed a resolution urging Myanmar to give access to citizenship for the Rohingya, many of whom are classed as stateless.
The organisation estimates some 25,000 Rohingya and Bangladeshis have boarded smugglers' boats between January and March this year, double the amount as over the same period last year.
Aberdeen's controversial City Garden Project has been narrowly rejected after a council debate.
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Nearly 600 people believed to be Bangladeshis and Rohingya Muslims from Myanmar have been rescued from boats drifting in Indonesian waters.