Just over half of the voters in Saturday's poll – 54 per cent – backed a call to allow couples to divorce after four years of separation.
"The referendum outcome is not the one I wished for, but the will of the majority will be respected and parliament will enact legislation for the introduction of divorce," Prime Minister Lawrence Gonzi, who campaigned for a No vote, conceded on Sunday.
Malta, a former British colony that won independence in 1964, was left as the last European country to forbid divorce when the Republic of Ireland reformed its marriage law in 1995.
It is one of only two countries in the world – the Philippines is the other – where divorce is still banned. Chile was the last country to legalise divorce in 2004 following public pressure.
In Malta, where 95 per cent of the 400,000 inhabitants claim to be Catholic and more than half attend Mass every week, the issue of divorce has been raging for decades and the vote was seen as a challenge to Church authority on the island.
The Roman Catholic Church had not campaigned openly in the run up to the plebiscite but Malta's Catholic authorities sent a clear message and a thinly veiled threat of excommunication.
Churchgoers were warned in a letter from the Archbishop of Malta Paul Cremona that they faced a choice between "building and destroying family values".
While Mario Grech, the Bishop of Gozo, the most conservative of the archipelago's three islands denounced reformers from the pulpit.
"If you are not in communion with Christ's teachings, you are not in communion with the Church and you cannot receive Communion."
Reformers argued that with 30 per cent of marriages failing, the ban on divorce was causing unnecessary suffering by preventing separated couples from moving on and marrying new partners.
Nearly one-third of children are born out of wedlock on the island.
Previously, married couples could apply for a legal separation through the courts, or seek a church annulment – a complex process that can take up to eight years.
A third option was to get divorced abroad, which would be recognised as valid in Malta but was financially prohibitive to many.
The leader of the yes movement, Jeffrey Pullicino Orlando, an MP with the governing Nationalist party, said the result was significant.
"It brings Malta into a new era where the state and the church are separate," he told local media.
Saturday's referendum, in which 72 per cent of those eligible cast their vote, was non-binding but the government promised to uphold the wish of the people and change the law.