In a world first, the federal government had applied for 74,000 hectares to be removed from World Heritage protection just a year after UNESCO moved to preserve it.
But UNESCO's world heritage committee rejected the Australian application.
Environment Tasmania CEO Charlie Sherwin has applauded the Heritage Committee's decision.
He said it's an endorsement of the World Heritage Convention by the world community.
“These trees were standing when Leonardo was painting the Mona Lisa,” he said.
“I think the world community has said that Tasmania’s forests have outstanding value for all people, for all time.”
120 thousand hectares of forest were listed for protection just last year, after an application by the previous Labor government.
The Upper Derwent, the Florentine and Huon Valleys and the Hartz Mountains are all covered.
The Abbott government wants logging to be allowed in half of it. About nine percent of it has been disturbed, with the rest pristine old-growth rainforest -- all of it protected under the convention.
The area was set aside for protection as part of the Tasmanian Forests Agreement, a deal struck with State forestry after years of so-called "forest wars".
The Forest Industries Association of Tasmania had written to the UN committee asking it to uphold the current boundaries under the TFA.
The federal government says despite the committee's decision, the matter is not necessarily over.
Parliamentary Secretary to the Minister for Agriculture, Richard Colbeck said the focus needs to be on creating jobs, not locking up forests.
"Well there's still a process between the state and Commonwealth government to unwind the complete disaster that was the Tasmanian Forest Agreement," he said.
"Those matters are being dealt with by the Tasmanian government and they've entered legislation in the Tasmanian parliament to deal with that."
Australian Greens Leader Christine Milne said the Abbott government was blind to the world heritage value of the forest.
"This is a win for common sense, the forests and people power," Senator Milne said.
Labor's environment spokesman Mark Butler said the proposal should never have gone to the committee.
"Australians do not support Tony Abbott's `dig it up, chop it down' attitude," he said.
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