The opposition parties managed to gather 156 votes in favor of the motion versus 145 for the government's survival on Friday.
The main opposition, Liberal Party, along with the separatist Bloc Quebecois and leftist New Democrats supported the motion.
Before the vote, the leader of the main official opposition Liberal Party, Michael Ignatieff, said "After five years of Conservative government, it is time to say enough is enough."
Earlier this week, a parliamentary committee hit another blow to the government as it announced that the conservatives had hidden the full costs of a spending program from parliament and people.
"A government that breaks the rules and conceals facts from the Canadian people does not deserve to remain in office," Ignatieff noted.
The Liberals vowed to scrap $6.1 billion in corporate tax cuts and end extravagant multibillion-dollar plans to buy new fighter jets and build prison cells.
Canada's budget deficit hit a record high of C$55.6 billion last year. The Canadian joblessness is 7.8 percent.
The Canadian premier has to go to the governor-general and ask to officially dissolve parliament and hold an election, which is slated for early May.
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