SYDNEY, December 1, 2013 (AFP) - Scott was leading by a stroke with one hole to play and looked certain to become only the second player ever to capture the Australian "Triple Crown".
However, the world number two dramatically bogeyed the last and McIlroy holed a 16-foot birdie putt for a final day 66 to win with a total of 18-under par at the Royal Sydney course, becoming only the second European to win the event.
Scott said he misjudged the wind and took too much club on the last, blowing his bid to add a home Open title to his victories at the Australian PGA Championship and Australian Masters with a 71 in the final round.
"I am gutted, I felt like I never had a better chance to win the Australian Open," Scott said afterwards.
"It was going to be a tough day, Rory made his move and I just couldn't get my putts in."
The US Masters champion's error on 18 in front of a stunned crowd opened the door for McIlroy, who said the Australian "gave me a couple of lifelines and I was able to take advantage of that on the last".
"While I am sorry to ruin Scotty's chance at winning the Triple Crown, I have just felt since September in a better (state) mentally these few weeks, with some things off the course," McIlroy said.
"Overall I just felt everything was coming together the way I wanted it to. It's been a frustrating year but I've worked hard and it's been a process trying to get back to winning golf tournaments again, and it was nice to do that this week."
Scott started Sunday's final round with a comfortable four-shot lead over second-placed McIlroy, but an eagle on seven closed the gap and the Northern Irishman drew level with a birdie on the eighth.
Going into the last, Scott was one ahead again but his second shot ran through the green. His third then went 20 feet past the flag before two putts meant a bogey five.
"I am disappointed to make that error up the last and open the door for Rory," said Scott.
"I was trying to keep the door closed all day but nothing was going my way on the greens today. I could have put this thing away early on if the putter was behaving how it should have."
After taking 23 putts in setting a new Royal Sydney course record of 62 on day one, Scott needed 35 putts over the last round.
The win was McIlroy's 11th worldwide and only his second outside of the European and PGA Tours. It earns him a first-prize cheque for Aus$225,000 (US$205,000).
Scott will now take a well-earned break before his next event and the PGA Tour's Tournament of Champions at Kapalua in Hawaii.
Australia's John Senden, the 2006 Australian Open winner, shot a last-day 66 to grab third place on 11-under par.
He secured one of three 2014 British Open Championship qualifying spots on offer this week, in the first of a revised qualifying system into golf's oldest major.
Joining Senden at next year's British Open Championship will be fellow Australians Bryden Macpherson (69) and Rhein Gibson (69) who shared fourth place at nine under par.
Leading scores after the final round of the Australian Open at Royal Sydney Golf Club on Sunday.
270 - Rory McIlroy (NIR) 69-65-70-66
271 - Adam Scott (AUS) 62-70-68-71
277 - John Senden (AUS) 73-68-70-66
279 - Bryden Macpherson (AUS) 71-70-69-69, Rhein Gibson (AUS) 71-70-69-69
280 - Matthew Jones (AUS) 68-68-72-72, Nathan Holman (AUS) 69-72-68-72
281 - Jason Day (AUS) 70-74-66-70
282 - Adam Bland (AUS) 69-72-70-71, Ashley Hall (AUS) 71-71-68-72, Leigh McKechnie (AUS) 73-65-71-73, Max McCardle (AUS) 68-71-69-74
283 - Brady Watt (AUS) 68-70-73-72, James Nitties (AUS) 70-71-74-68, David McKenzie (AUS) 66-75-71-71, Nick O'Hern (AUS) 70-72-70-71, Stuart Appleby (AUS) 75-67-67-74, Alistair Presnell (AUS) 67-71-74-71