Despite the Yes campaign winning a majority in the largest city of Glasgow, the margin of victory was not large enough to give Alex Salmond and his campaign the momentum they needed.
There is still one council left to declare, but Scots have voted by a margin of around 55%-45% to stay part of the United Kingdom.
No has assembled an unassailable total of 1,914,187 votes (55.42%), with Yes trailing on 1,539,920 (44.58%).
David Cameron said the result settled the issue for a generation, after SNP leader Alex Salmond said he accepted the verdict of the people and called everyone else to do the same as he conceded defeat.
Follow all the reaction to the result on our live blog
Scottish referendum VIEW GALLERY
Salmond said: "Thank you to Scotland for 1.6m votes for Scottish independence.
"We know that there is going to be a majority for the 'No' campaign.
"Scotland has by majority decided not, at this stage to become an independent country."
"This was a substantial vote for Scottish independence and the future of this country.
"The process by which we have made our decision as a nation reflects enormous credit to Scotland.
"This has been a triumph for the democratic process and for participation in politics."
In the wake of a No vote, the three Unionist parties are expected to begin work with their colleagues north of the border to kickstart further devolution to Scotland.
Draft laws offering the country more powers are expected to be published in January 2015.
But despite a No vote, the coming months could still be fraught, with English and Welsh MPs demanding powers for their own regions.
Cameron is expected to announce that he will move “swiftly” to “rebalance” UK powers with only English MPs able to vote on English issues.
This could mean that no Scottish MP could PM or Chancellor - a situation totally unacceptable to Labour.
The historic poll saw Scots vote in record numbers to decide the future of the United Kingdom.But Alex Salmond’s dream of independence suffered an early blow when the key battleground of Clackmannashire voted 19,036 to stay in the union, with 16,350 against.
The region was one of the top targets for the SNP and the result left their hopes of winning hanging by a thread.
As expected the SNP won the “Yes City” of Dundee but the 53,620 to 39,840 result was not the knock out victory they had been predicting.
The nationalists also won in West Dunbartonshire - traditionally Labour territory - by 33,720 to 28,776.
Elsewhere, the Labour bastions of Renfrewshire and Inverclyde both voted to stay in the UK.
Crucially, the SNP stronghold, the Western Isles, also voted to reject independence by 10,544 (53%) to 9,195 (47%). Aberdeen also voted No as did Angus and Dumfries.
Facing defeat on his own patch, Alex Salmond failed to show at his local count in Aberdeenshire and was seen slipping through a side gate at Aberdeen airport and boarding a private jet bound for Edinburgh in the early hours.
The Queen is reported to be preparing to make a statement in the next few days in an attempt to heal the wounds caused by the bitter contest.
In the strongly pro-unionist island of Orkney they voted 10,004 for No and 4,883 for Yes.
Shetland also rejected independence by 9,951 votes to 5,669.
Hopes rose after the insiders said the postal votes - nearly a quarter of the total ballots cast - showed the No campaign winning comfortably.
Getty Scottish referendum
Joy: Pro-Union supporters react as results come in
Michael Gove declared the UK was “safe” shortly after 2am, saying: “I’m glad that it appears that, fingers crossed, the United Kingdom is going to stay together.”
The referendum was on course for a record turnout of 85% with more than 4million Scots expected to cast their vote.
Experts predicted it could comfortably top the 83.9% recorded in the 1950 general election.
That would make it the highest for any vote in the UK since universal suffrage was introduced in 191 In the key seat of Clackmannanshire, 19,036 voted to stay in the union, with 16,350 for independence.
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