However Transport Minister Warren Truss left the way open for a merger between the two successful carriers, saying consolidation within the industry was inevitable.
His rejection of a proposal to allow Singapore Airlines to join Qantas and United Airlines on the route comes after four years of lobbying and a nine-month review of airline policy.
Announcing the findings the review, Mr Truss said Australia sees an open skies policy as an aspirational goal, and allowing Singapore Airlines to fly the route could hurt the Australian economy.
But he did back a proposal by Virgin to offer a cut-price service on the route as early as next year.
Mr Truss said the government sees the route as a "key national asset" and would only negotiate access to the route "when it is in the national interest.
"In terms of the Singapore Airlines' request for access (to Australia-US routes), the government has decided not to grant them access at the present time," he said.
"If access is negotiated in the future, it will be limited and it will be phased."
Singapore has campaigned for years to be permitted to fly the route, arguing its presence would put downward pressure on fares ands increase tourist numbers to Australia.
Qantas, which earns as much as 20 percent of its profits from its Sydney-Los Angeles services, had argued that it would be disadvantaged if state-backed airlines such as Singapore Airlines were allowed to fly the route.
Mr Truss said the government's own economic modelling revealed that tourism to Australia will not increase with greater competition.
"The reason for that is that the Singapore product is broadly similar to Qantas. Whilst any new airline would attract some new clientele, the reality is that US travellers prefer to travel on US carriers," he said.
Instead, he urged Qantas and Singapore to consider merging, a move that would give them the financial muscle to take on other major international airlines.
Singapore Airlines said the decision meant consumers had lost out.
"Today's decision from the Australian Cabinet to not lift protection of Qantas on the Australia-US route is a disappointment in the long journey to opening the aviation market to more competition," it said in a statement.
"The Australian tourism industry and all consumers who pay high fares on the USA route are, again, the losers from today’s decision. The decision offers no prospect for relief from high fares," it said.