STV had been bidding for the contract as part of a consortium
A group of Scottish newspaper publishers has been named as preferred bidder to run the news service on STV.
The Scottish News Consortium had been competing against the Scottish News Network, which includes STV, for the contract to provide the service.
The consortium is made up of DC Thomson, the Herald and Times Group, Johnston Press and Tinopolis.
The contract for providing commercial news bulletins in the Borders and Tyne Tees region was won by News 3.
Wales Live is the preferred bidder in Wales.
News 3 is comprised of newspaper publishers Trinity Mirror, the Press Association and independent TV production company Ten Alps.
The UK government invited bids after commercial stations said they could no longer afford to make local bulletins.
The government described the Scottish News Consortium (SNC) proposals for news services in the STV regions as "imaginative and innovative".
Tom Thomson, from SNC, confirmed viewers in the former Grampian TV area would still receive a separate half hour programme on weekdays evenings, rather than a local opt out from a Scottish national service.
An STV spokesperson said: "STV will now look to engage with Scottish News Consortium to discuss the continued provision of a high quality news service to STV's viewers."
STV had made a bid for the contract as part of the Scottish News Network, which also included ITN and Bauer Radio.
The total value of the three contracts is some £47m over two years.
The winning consortia are being tasked with delivering local news content across the web, mobile, and other new platforms, along with the television slot currently occupied by ITV and STV regional news in the areas.
The Conservatives have previously said they will examine whether the scheme can be scrapped if they win the forthcoming General Election.
Culture Secretary Ben Bradshaw, who made the announcement, said: "The funding available to these consortia represents a massive commitment from this government to help encourage the long-term sustainability of news in the nations, locally and in the regions.
"I hope this focussed work will now continue with everyone working together to ensure these pilots are up and running by the end of the year."
The announcement followed an evaluation process completed by an independent selection panel led by Richard Hooper.
Mr Hooper said the bids had demonstrated how television, local newspapers, the internet and local radio could work together in new and interesting ways.
He added: "In Wales and Scotland, in addition to strong proposals for regional, local and hyperlocal/community news, the bidders put forward credible ideas for quality news for those nations which is urgently needed as a result of devolution. We asked for innovation and were not disappointed."
Mr Hooper said he was particularly impressed by the "enthusiasm and resource commitment" of the bidders to deliver multi-platform and multi-layered news in order to compete with the BBC.