The rail link was to have opened in time for the Commonwealth Games
Scottish ministers have been accused of being "anti-Glasgow" over the decision to axe the Glasgow Airport Rail Link amid concerns about spending cuts.
The city council said the move was "a dagger in the heart" of the west of Scotland economy.
Ministers highlighted significant investment in the city's transport, health and housing.
Up to £182m had been earmarked for improving the line between Glasgow and Paisley, with £47m already spent.
The rail link involved plans to upgrade five-and-a-half miles of track and lay one mile of track between Paisley St James Station and Glasgow Airport.
A spur would then have been built from Paisley to Glasgow Airport.
The leader of Labour-controlled Glasgow City Council, Steven Purcell, hit out at the SNP government over its decision to axe the plan.
He said: "The Glasgow Airport Rail Link is a vital piece of the infrastructure needed for the 2014 Commonwealth Games and the continued economic growth of the west of Scotland.
"The SNP has today taken that from us and offered us part funding for a bus lane. That is the worst deal in modern history.
"The Scottish Government has a clear anti-Glasgow agenda. They are investing billions of pounds in the east and north east of Scotland, with projects such as the new Forth crossing, and giving Glasgow the crumbs off the table."
Alistair Watson, chairman of Strathclyde Partnership for Transport, said: "We are deeply disappointed at the cancellation of the Glasgow Airport Rail Link particularly as SPT has campaigned for the project for 20 years.
"We hope that it doesn't prejudice the Commonwealth Games as the airport link is central to the bid."
He said that if problems with rising costs had arisen these had developed after the time that SPT was the lead agency on the project.
"Every cloud has a silver lining though and we welcome the government support for our Bus Rapid Transit system know as Fastlink," he added.
The decision was also criticised by Glasgow Chamber of Commerce chief executive Stuart Patrick who described it as "intensely disappointing".
He said: "The case for the Glasgow Airport Rail Link was overwhelming. It would have played a vital role in the integrated transport system in the west of Scotland as a whole, providing desperately needed relief for the grossly congested M8, thereby speeding up the business process."
Mr Patrick said the link would also "have safeguarded jobs, grown the economy of the region and boosted the importance of Glasgow Airport within the Scottish economy".
The planned rail link would have seen four trains run between Glasgow and the airport every hour, with a stop in Paisley.
The link was originally proposed by Strathclyde Partnership for Transport which won backing from MSPs for the plan in 2006.
Responsibility for taking the project forward passed to Transport Scotland last year with a provisional budget of up to £395m.
The link could have created up to 1,300 jobs
The project was due to be completed in two stages in time for the 2014 Commonwealth Games in Glasgow.
Scottish ministers estimated it would have generated 1,300 jobs in total.
Up to £182m had been earmarked for improving the line between Glasgow and Paisley.
About £47m of this has already been spent on station improvements to Glasgow Central and new track and signalling.
This work will continue but the spur between Paisley St James Station and Glasgow Airport - including a new station at the airport - will not go ahead.
It is estimated that by shelving these plans, the Scottish Government will have saved up to £200m.
The airport operator BAA said it was "disappointed that Transport Scotland underestimated the costs of relocating infrastructure to the extent that the project can no longer proceed".
A spokeswoman said: "We raised our concerns over the original cost estimates when the Glasgow Airport Rail Link was reviewed by the Scottish Parliament three years ago and recognise that Scottish ministers have since faced significant increased costs from Transport Scotland's revised forecasts.
"Like many others, we have invested a good deal of time and effort in the Glasgow Airport Rail Link and believe that Scotland urgently needs to upgrade its long-term transport infrastructure."
Renfrewshire Council leader Derek Mackay said he was disappointed at the decision though he understood the reasons "at a time when public funding is under serious pressure".
"We all must take an honest and realistic approach to such projects given the drastically changed economic position from when the business case was originally considered," he said.
"Disappointment is counterbalanced with the real prospect that costs could have soared."