The European Parliament has voted to reject the Anti-Counterfeiting Trade Agreement (Acta).
The proposed agreement sought to curb piracy, but internet campaigners said it posed a threat to online freedoms.
The rejection vote followed a failed attempt to postpone the decision because of ongoing investigations into Acta by the European Court of Justice.
Euro MP David Martin said: "It's time to give [Acta] its last rites."
Twenty two EU member states, including the UK, had signed the Acta treaty - but it had not been formally ratified.
Outside the EU, the treaty also had the support of the US, Australia, Canada, Japan, Morocco, New Zealand, Singapore and South Korea.
However, following significant protests, several countries chose not to back the treaty.
Wednesday's vote is seen by most observers as the final blow to the treaty in its current form.
A total of 478 MEPs voted against the deal, with 39 in favour. There were 165 abstentions.