His defeat called to mind his compatriot Greg Norman's loss at the Masters in 1996 when Nick Faldo overhauled a six-stroke deficit to snatch victory at Augusta in the last round.
"I'm very disappointed but I played so beautifully for most of the week I really shouldn't let this bring me down," said Scott.
"I know I've let a really great chance slip through my fingers today, but somehow I'll look back and take the positives from it."
Els, who was ninth at last month's US Open, becomes the 16th consecutive different major champion and moves up from 40th to 15th in the world rankings. He also finished tied second when Royal Lytham hosted the Open in 1996 and tied third when it was last held on the Fylde coast, in 2001.
Scott led by four overnight and was still four clear of second-placed McDowell by the turn as the expected challenge in a stiffening breeze failed to materialise.
Els was six shots adrift after going out in two-over 36 but he edged into the frame with birdies at the 10th, 12th and 14th.
His putt across the final green set up the prospect of a play-off but Scott found a bunker with his drive and was unable to make his par.
Donald, who like Scott is also still searching for a maiden major title, echoed the Australian's feelings, and the feelings of many in the field.
"Certainly I'll leave this week knowing that my game is definitely good enough to win majors," said the 34-year-old, who finished five shots behind Els.
"Unfortunately I couldn't quite hole the putts, but I'll take a lot of positives away from this week."
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