The Scottish Poppy Appeal raised £2.58m last year, but failed to beat the total raised in 2011.
Poppyscotland, the charity for ex-servicemen and women that runs the appeal, said this was the first time donations had fallen year on year since 2003. In 2011, the poppy appeal made a record £2.68m.
The appeal was launched by the Scottish singer Susan Boyle in October and raised money to support vulnerable ex-servicemen and women and their families, who have a multitude of complex needs.
The 3.7 per cent fall has been put down to the financial climate. The charity pointed out that according to UK Giving 2012, published by the National Council for Voluntary Organisations and the Charities Aid Foundation, total donations fell by 20 per cent in 2011/12.
Ian McGregor, the charity’s chief executive, said: "We did not exceed the 2011 total, but we are very proud of this result. We recognise the difficulties faced by individuals and families, with the country in recession and the cost of living rising."
But he said that the charity had to raise more money this year to continue to fund existing services and a range of planned new initiatives.
The Royal British Legion’s 2012 Poppy Appeal has raised £34m so far towards its ambitious target of £42m. A spokeswoman said money was still coming in and it would not know the final total for another couple of months.