Caledonian MacBrayne's ferry routes will be put out to tender, the Scottish Executive has confirmed.
The tendering proposals have caused a political dispute
The decision comes despite the Scottish Parliament earlier rejecting the idea.
Transport Minister Tavish Scott said he had no alternative under current European competition laws on state-subsidised services.
CalMac is fully state-owned and receives about £25m a year from the executive, but the EU says taxpayers must be given value for their money.
Since MSPs rejected opening up the routes to private operators last December, the SNP and unions have argued against the plan.
However, prolonged discussions between ministers, officials and the European Commission have left the executive in no doubt that going out to private tender is the only way forward.
It is believed that Gourock to Dunoon will be held apart from all other routes but that the specification to be met by bidders has been tightened to further protect staff pay and conditions, including pensions, and to improve the services provided to islanders.
CalMac is currently the only company operating the Clyde and Hebrides ferry routes, many of which are regarded as "lifeline" services.
In a report published on Monday, the executive said that the only legal alternative to tendering would be for a subsidy to be provided to all operators on each route.
This would lead to a "significant increase" in subsidy payments, an end to integrated routes, a loss of support for freight services and an adverse impact on staff's terms and conditions, the report warned.
SNP transport spokesman Fergus Ewing said the report failed to state what options other than tendering were discussed with the commission.
Workers' rights are at the centre of the debate
The full parliament will debate the executive's proposed next steps on Wednesday afternoon.
Transport Minister Tavish Scott's motion, which will be put to a vote following the debate, notes "the serious consequences of these services not being compatible with the (EU) regulations".
It refers to ministers' commitment to "secure the continued employment of the Caledonian MacBrayne workforce and the protection of their terms, conditions and pension rights".
Tendering of the Clyde and Hebrides lifeline ferry services is required to protect these "vital services", it also says.
Questions from MSPs
Appearing before Holyrood's transport committee, Mr Scott said: "None of the papers submitted to the committee proposing alternatives to tendering would comply with EU law.
"In some cases, even if they did comply, they would still end in tendering but on a route-by-route basis.
"I have therefore concluded that tendering is the only way open to ministers and parliament to protect the lifeline Clyde and Hebrides ferry services."
Meanwhile, Audit Scotland has announced that it is to conduct an investigation into the executive's tendering process for the Northlink ferry serving Orkney and Shetland.
The inquiry will focus on whether the process was conducted fairly and managed properly.
The SNP has called for the tendering process to be put on hold pending the investigation after the cost to the taxpayer doubled to more than £63m.