Scotland Office minister Lord Dunlop told the Lords: "The UK Government remains of the view that there should not be a further referendum on independence.
"Even at this late hour we call on the Scottish Government to take it off the table. Another referendum would be divisive and cause huge economic uncertainty at the worst possible time," he warned.
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Answering an urgent question, Lord Dunlop said people in Scotland voted decisively just over two years ago to remain part of the UK and urged the SNP not to press ahead with another referendum during Brexit negotiations.
The Scottish First Minister's bombshell announcement on Monday overshadowed the House of Lords vote which finally cleared the way for the Prime Minister to start the formal Brexit process.
Peers from all sides of the House rounded on Ms Sturgeon, insisting that voters in Scotland did not want to go to the polls so soon again.
mf Page 2: 15:49 Labour former minister and ex-chief of naval staff, Lord West of Spithead said that if a referendum was allowed it was essential it was held after complex Brexit negotiations were completed.
Lord Dunlop said he could think of nothing more calculated to "undermine the achievement" of a good Brexit deal than holding a "divisive and disruptive" independence referendum during one of the most important peacetime negotiations ever faced by Britain.
"At this time we should be working together to get the best possible deal for the whole of the UK and each part of the UK, particularly Scotland."
Opposition spokesman Lord McAvoy said there was no desire in Scotland for a second referendum, which was simply "not in Scotland's best interests".
The UK needed stability and a "period of relative calm, not yet more uncertainty," he said. The SNP had promised to abide by the result of the last referendum but had been "agitating for another referendum" ever since losing the last.
Lord Dunlop said the result of the referendum held in 2014 should be respected. "It was, as Nicola Sturgeon herself said, a once in a generation vote."
Both sides had signed the Edinburgh agreement which committed to respect that result but only two and a half years later she was calling for another referendum.
"All the evidence is that the people in Scotland overwhelmingly do not want another divisive, disruptive referendum," he said.
"They know the damage that would do to the Scottish economy, to Scottish jobs and would take the eye off the ball of the domestic agenda, which is what we should be focused on."
"It is not what people in Scotland want - not now, nor after Brexit," he said.
"The SNP should stand by the Edinburgh agreement and stick to their word that this was once in a generation, not a never-ender to be repeated and repeated."
Labour former Scottish secretary Baroness Liddell of Coatdyke said she had just received an email from a "leading player in the Scottish commercial property market to say that overnight £50 million worth of deals had been withdrawn as a consequence of the possibility of a referendum".
She said that at a time when the Scottish economy was already weakened and people were "seriously troubled by our education and health sectors", Ms Sturgeon's action was one of "unpardonable folly".
Lord Dunlop said he met many Scottish business people and had yet to find one who thought it a good idea to "engender this uncertainty" by calling for another referendum.
Former Ulster Unionist leader Lord Empey said nationalists in Northern Ireland had welcomed the move and were now trying for a "pincer movement" to have both a Scottish referendum and a Northern Ireland "border poll".
Urging ministers to take a "robust" stand, he said the Government should make clear that neither would be held.
Lord Dunlop said he had made the position clear on Scotland.
In Northern Ireland there were "clear mechanisms" under the Belfast agreement for holding a border poll but the Government had made clear that conditions for such a poll did not exist.