The European Parliament has voted against the appointment of Kevin Cardiff to the European Court of Auditors.
The former head of the Department of Finance, who oversaw a €3.6 billion accounting error, lost out by just one vote.
The Government says it has been notified of the outcome and is taking it into consideration.
European lawmakers today questioned the Department of Finance's failure to spot a 2010 accounting error that overstated Ireland's national debt by €3.6 billion. Finance Department officials were told about the mistake repeatedly over the past year, but admitted and corrected the error only this month.
The lawmakers rejected Mr Cardiff's nomination in a 12-11 vote - the first such defeat of a candidate since the formation of the Court of Auditors in 1975. They approved candidates from seven other EU countries for appointment to the Luxembourg-based court, which audits EU finances.
Several lawmakers told Mr Cardiff they had received an unprecedented deluge of emails from Ireland appealing for them to block his nomination.
Mr Cardiff said he understood Irish anger over the Government's handling of its debt and banking crisis, which forced the country to accept a bail-out last year. He said he was a target of that anger because he is one of the few key figures still involved in the Government who helped to forge the 2008 bank guarantee scheme.
He also faced critical questioning over his claim, when facing questions from an Oireachtas committee, that the EU court job would be "a doddle" compared to his work as secretary general of the Finance Department.
He explained today that the EU job would be comparatively less challenging than his work since 2008 in trying to help save Ireland from bankruptcy. "By comparison to the four years of sheer battling, the nights in which you wake up wondering if you made a mistake that would cost a billion or would make a billion - I thought it would be easier," Cardiff testified.
"I certainly was not suggesting that the job of the Court of Auditors would be easy," he added.
Mr Cardiff's current job as Secretary General of the Department of Finance has already been advertised, and the closing date for applications is tomorrow.
However, there may be some ambiguity in the advertisement, which states that "Applications are sought for the post of Secretary General of the Department of Finance following the nomination of the current holder to a position in a European institution. The vacancy is expected to arise early in the New Year."
The advertised salary is €200,000 with a term of up to seven years.
