Prime Minister John Key said he was "surprised and a bit disappointed" that the split age option he preferred had not gone through.
He said he believed there was quite a strong preference among the wider public for the age to change from 18. The split age was a good compromise.
After first voting for the split age, he voted for 18 in the second vote.
"The split age wasn't ideal but it was better than leaving everything at 18."
Asked why he then voted for 18 at the second vote he said:
"I felt moving it to 20 across the board didn't make sense. In a supervised environment like a bar I'm not convinced that's the place we are seeing excessive alcohol use."
Mr Key still believed that the other changes in the alcohol reforms would make a difference to alcohol problems.
Justice Minister Judith Collins said she was not disappointed that the Government's proposal had been voted down. "I always said I could live with any of the options."
She had voted for the split age, and in the second round voted to raise the age to 20.
"I think, hopefully, that it sends a message that we expect [youth] to be responsible, just as we expect older drinkers to be responsible," she said.
The split age was announced as one of the main reforms in 2010 by the Justice Minister at the time, Simon Power, after the Law Commission recommended raising the age to 20.
In a Herald poll last year, MPs overwhelmingly supported the split age.
But under a new Government, it has fallen out of favour.
Many MPs felt the option demonised 18- and 19-year-olds and ignored the fact that alcoholism was a problem for all generations.
In the parliamentary debate, National's Tau Henare urged MPs "to lay off the young people".
He said that at the age of 18, young people were entrusted with voting for governments and defending New Zealand or other countries in the army.
"But they can't have a beer? Give me a break."
National's Auckland Central MP, Nikki Kaye, who tabled the amendment to keep the age at 18, said the vote showed there were better measures to curb youth drinking.
She spoke of the need to limit advertising aimed at young people, and make it more difficult for young people to falsify identification cards.
The National MP for Hamilton West, Tim Macindoe, who backed raising the age to 20, said the result "sent the wrong message to young people".
National MP Mike Sabin, a former policeman and drug counsellor, said the human brain kept developing until age 25, and the later young people began drinking, the better.
Labour health spokeswoman Maryan Street said she could not bring herself to support the 18 option.
"If I were to become the Minister of Health, I could not look any health practitioner in the eye and say, I did not do everything I could to curb the harm that alcohol does.
"I do not think this is an anti-young-person position to take. Quite the contrary."
Prime Minister John Key, who is in Rarotonga, voted for the split age by proxy, then chose the 18 option - the same choices made by Labour Party leader David Shearer.
Act Party leader John Banks voted for a split age, which led to criticism from the party's youth wing.
He then chose 18, but the Act on Campus group said his initial preference went against the party's principles of personal responsibility.
The focus will now move to the bill's other measures, which include banning late-night alcohol sales in bottle shops, strengthening consent rules for parents and guardians, and giving communities a greater say on the number and location of liquor stores in their area.
