The Scottish Government has scrapped the £120m Glasgow Airport Rail Link, amid public spending cut concerns.
Finance Secretary John Swinney also announced funding reductions in housing and education, as he unveiled his £35bn budget plans for the year ahead.
Holyrood ministers said they had £500m less to spend because of Westminster efficiency cuts, but insisted vital public services would be protected.
Labour said the level of cash in the pot would actually go up by £600m.
Mr Swinney told the Scottish Parliament the rail link had to go to cope with a £129m cut in the NHS budget, as a result of UK government reductions in heath department capital spending.
He insisted vital public services would be protected and economic growth boosted, but warned MSPs: "In light of the difficult financial climate that we face, as a responsible government we have therefore had to face difficult choices about where to reduce planned spending next year."
The Scottish Government's published document outlined plans for a £253m cut in housing and regeneration, with reductions of £2.7m in schools funding and £76m in enterprise.
There will also be an overall £14m reduction in Scottish Government administration costs. Health spending will rise by £263m and higher education by £22m, while police funding will see a £6m increase.
And council tax is also set to be frozen for a third year.
Mr Swinney said: "The UK government's cuts have also put pressure on our resource budgets.
"In dealing with this, I have been determined to act in a way that protects jobs, supports families and communities and keeps our investment in skills, innovation and our industries of the future."
Labour finance spokesman Andy Kerr said the only cuts had come from Mr Swinney himself, with the minister's "prints on the knife".
Mr Kerr went on: "Like the latter-day Sweeney Todd, the demon barber of Fleet Street, he's been caught in the act standing over the body.
"What is that body? It's the Glasgow Airport Rail Link and the jobs and the economic impact that we would've had."
The Conservatives' Derek Brownlee said the rail link decision was a casualty of "Labour's cuts", adding: "It won't be the last, given the state the public finances are in."
But Liberal Democrat finance spokesman Jeremy Purvis directed his criticism at the Scottish Government, telling MSPs: "This is unfortunately a budget that does not address the key needs, nor does it make some of the changes that we will have to see in the coming year."
The Glasgow Airport Rail Link, which was due to open in time for the 2014 Commonwealth Games, was overwhelmingly backed by MSPs as a "nationally significant project".
Mr Swinney said he was also concerned at the project's rising costs - but promised other measures to improve public transport in the west of Scotland.
Glasgow City Council leader Steven Purcell said ministers had a "clear anti-Glasgow agenda".
He also said there was a "compelling case" for Chancellor Alistair Darling to continue allowing future spending to be brought forward.
Parliament will be asked to approve the spending plans next spring.