Prime Minister Enda Kenny had instructed his Fine Gael party members to vote against the bill as the state's top legal adviser believed it contravened the Eighth Amendment of the Irish constitution, which recognises the equal right to life of the unborn and the mother.
"The bill is bad for women and medically inadequate," the prime minister said earlier this week.
Fine Gael deputies were joined by members of Fianna Fail, the other main centre-right party, and the bill was defeated in a vote of 95 to 45.
"It will add urgency to the fact that there's at least four or five women every week in Ireland having to travel out of the country to have a fatal foetal abnormality dealt with," he said.
Abortion is illegal in Ireland unless there is a real and substantial risk to the life of the mother, and a woman convicted of having an illegal termination faces 14 years imprisonment.
However, women are free to travel abroad for abortions and thousands do so every year, mainly to England.
Parliament is due to debate a separate bill seeking a referendum on the repeal of the Eighth Amendment within the next three months.
It will also top the agenda for discussion at a Citizens' Assembly composed of a random sample of the adult population, which the government has pledged to create before the end of the year.
The Eighth Amendment was passed overwhelmingly in 1983, with 67 per cent voting in favour and 33 per cent against.
Last month the UN Human Rights Committee found Ireland's abortion laws "cruel, inhuman and degrading".