It had submitted plans for a new short-term holding facility near Glasgow Airport, which would have replaced the Lanarkshire detention centre.
But Renfrewshire Council rejected the planning application for the new facility.
As a result, the Home Office said it will retain Dungavel House for people who are facing removal.
The Home Office said it had been "disappointed" by the council's decision to block a new holding centre.
It said the Glasgow Airport plan would have created a "modern and secure facility" for "those with no right to be in the UK".
A spokesman said: "We always made clear that the closure of Dungavel immigration removal centre was dependent on the opening of a new short-term holding facility in Scotland.
"As the application for a new facility at Paisley was rejected, Dungavel will remain open."
The replacement would have used to detain people under immigration powers for up to seven days before they were moved on to an airport for deportation or to an immigration removal centre.
The Home Office has said it believes detention and removal are essential parts of effective immigration controls but insists they are carried out with dignity and respect.
Officials say that when people are detained, it is for the minimum time possible.
They pointed out the most recent inspection of Dungavel by Her Majesty's Inspector of Prisons found that the centre was a safe place where detainees are given the support and help they need.
The Lanarkshire detention centre has attracted protests from opponents who described it as "racist and inhumane".
The Home Office has abandoned plans to replace the immigration removal centre at Dungavel House.