The Scottish Government has been defeated in a vote at Holyrood after opposition parties united behind calls for Highlands and Islands Enterprise (HIE) to retain its own board.
Ministers want a new management body to oversee all of Scotland's enterprise and skills agencies.
The Conservatives said the loss of a separate board "effectively means the end of HIE as we know it", but Economy Secretary Keith Brown insisted HIE would still be locally managed.
The Tories' motion calling on the Government to "reverse this decision and ensure that the HIE board continues to take all strategic, operational and budgetary decisions" was backed by 64 votes to 63.
Tory MSP Donald Cameron said the debate was not just about the "dry technical structure of just another Government agency", but concerned "the fundamental nature of HIE and what it does".
He told the chamber: "We mustn't be sentimental, HIE hasn't got everything right... but undoubtedly it has been a force for good."
He said 20% of Scotland's enterprises are in the Highlands and islands, despite the region having only 9% of the population.
"If this ill-conceived proposal goes ahead, everything will change," he continued.
"It is the board that makes HIE special. Having a separate and independent board allows HIE to use the experience and expertise of business leaders to further its aims."
Describing the abolition as part of the Government's "inexorable centralising agenda", Mr Cameron added: "Note the ultimate irony - it was a UK Government in far away Westminster that gave us the board, but it is the Scottish Government here in Edinburgh that takes it away."
He later said: "The Scottish Parliament has expressed a clear will on this, and now the SNP must listen."
Labour's Rhoda Grant said: "Highlands and Islands development board and Highlands and Islands Enterprise have over 50 years of proven economic and social success between them, and why would anyone would want to dismantle that?
"Despite how the SNP wriggle and recant, that is exactly what they are trying to do."
Following the vote, she added: "Nationalist ministers must now respect the will of Parliament and scrap this plan."
The move is part of the enterprise and skills review, and would see a new Scotland-wide statutory board for Scottish Enterprise, Highlands and Islands Enterprise, Skills Development Scotland and the Scottish Funding Council.
Mr Brown said: "The review that we undertook has focused on how best we can ensure that our agencies are working together.
"Respondents said there was a complex and cluttered landscape which is often confusing and that we needed clearer alignment of our services to deliver our national ambitions.
"That's why we will align these key agencies under a strategic Scotland-wide board, and also protect local decision-making, local management and local delivery."
Mr Brown added: "The review we are undertaking is aimed at giving businesses and individuals in the Highlands and Islands additional access and support from national services as part of a more coherent system.
"I am committed to the services and support that HIE provides, and will meet with MSPs from across the chamber in order to discuss the way forward.
"I believe that everyone shares a commitment to HIE and to retaining its key role in the future.
"We are actively engaging with all four enterprise and skills agencies, their existing boards and other experts in developing the detailed scope, potential structures and functions for the new board.
"I will come back to the chamber to provide an update in due course."
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