Drugs will continue to be designated as class A, B or C, despite MPs claiming the system was "not fit for purpose".
A review of the classes to reflect the harm caused, suggested by MPs in July, could have seen alcohol and tobacco ranked alongside heroin and cannabis.
But the Home Office is to stick with the system, disappointing those who felt it was out of date.
It has also begun moves to reclassify the highly-addictive club drug crystal meth from class B to class A.
Ministers were responding to the Commons Science Committee's report that the designation of drug classes should be changed.
The commitee said it would be better to classify drugs in terms of harm caused rather than the level of penalties they attracted.
One system considered by former Home Secretary Charles Clarke had rated some illegal drugs as less harmful than alcohol and tobacco.
But Home Office minister Vernon Coaker said they would be keeping the old system.
"It is important that there is a coherent system in place to categorise drugs and determine the penalties for their manufacture, possession and supply," he said.
"I believe that the existing classification system does this effectively, allowing for clear and meaningful distinctions to be made between drugs."
The chief executive of the charity Drugscope, Martin Barnes, said he was "extremely disappointed" the system would not be reviewed.
"It was introduced 35 years ago and during that time we've seen levels of drug use increase significantly [and] levels of drug-related harm increase.
"I don't think there's a silver bullet. There's no ideal system, but let's look at whether or not - to use the Home Office phrase - it's still fit for purpose."
Methamphetamine, which causes euphoria, is known as crystal meth
For the Conservatives, David Davis welcomed the decision not to revise the classification system, but said it was "just the latest twist and turn in the government's drug policy".
But Nick Clegg of the Lib Dems said an overhaul of the classification system was "sorely needed".
The British Crime Survey has already estimated that 750,000 people took cocaine powder last year, with a slight increases in all age ranges between 16 to 44.
But it found overall class A drug use remained stable and the use of all drugs declined in 2005-6.
Government plans to introduce a threshold for the amount of drugs for which people could be prosecuted for dealing have been abandoned - because no-one could agree on what the limit should be.
The government also tabled orders in Parliament to reclassify crystal meth as one of the UK's most dangerous drugs. It means amending the Misuse of Drugs Act 1971 following debates in the Commons and the Lords.
Anyone caught with it will then face an unlimited fine or up to seven years in jail.