The South Australian Parliament rejected the bill today 24 votes to 23.
South Australia almost became the only Australian state or territory to allow assisted suicide.
Australia's Northern Territory became one of the world's first jurisdictions to legalize mercy killing in 1996.
Renowned pro-euthanasia doctor Philip Nitschke helped four people die before the Australian Parliament overturned the law in 1997.
While the Australian Parliament can overturn territories' laws, it does not have the same power over state laws. South Australia Premier Jay Weatherill said today he felt "gutted" by the defeat. But he was sure a new bill would be introduced in time.