The closely watched vote came as the US labour movement is fighting for its very survival after decades of shrinking membership rolls.
The unionisation efforts faced stiff opposition from local politicians, who warned that that a UAW victory would make it harder to attract new jobs to Tennessee and even threatened to withhold tax credits that would help VW expand production.
Convincing workers in the southern United States to pay union dues wasn't easy, especially after the UAW was blamed for the downfall of the Detroit Three carmakers.
A total of 1,338 employees at VW's Chattanooga plant — 89% of the workers — voted over a three-day period in the secret ballot election, which was monitored and tallied by the National Labor Relations Board.
Volkswagen workers voted against joining the union in a final vote of 712 to 626.
"While we're outraged by politicians and outside special interest groups interfering with the basic legal right of workers to form a union, we're proud that these workers were brave and stood up to the tremendous pressure from outside," said UAW secretary-treasurer Dennis Williams, who directs the union's transnational programme.
"We hope this will start a larger discussion about workers' right to organise."
Despite strong traditions of organised labour in their home countries, German, Japanese and South Korean automakers have strongly resisted unionisation efforts in the United States.
Many of their plants were established in southern states which are not considered union-friendly and VW — like its rivals — made sure it paid wages and benefits that were in line with those won at UAW plants like the one GM operates in Tennessee.
But Volkswagen opened the door to the UAW last year under pressure from German unions to give the Tennessee plant a seat on VW's global works council, which gives employees a say in the management of the company.
The tacit support of management was not sufficient to sway workers, however.