The 61-year-old singer produced a stirring performance of Believe in Me on Saturday night in Malmö, Sweden, but was awarded just 23 points.
Nevertheless, that was 11 more than last year's British entry by Engelbert Humperdinck, who finished second from last.
"I'm sure a lot of people will be disappointed on my behalf but I have really enjoyed my Eurovision experience," said Tyler. "I did the best that I could do with a great song. I don't feel down and I'm ready to party."
The contest was won by the favourite, Denmark's Emmelie de Forest, who received 281 points for her song Only Teardrops, well ahead of the runners-up, Azerbaijan.
Tyler, best known for her 1980s power ballad, Total Eclipse of the Heart, which topped the singles chart in the UK and several other countries, was a 50-1 outsider to win. The Welsh singer said she had hoped to do better but could not argue with the countries that finished top of the pile. "Of course I would have liked to bring it back to the UK but it's been a night to remember."
Tyler, who has been nominated for three Grammy awards, added: "I'm so glad and so happy that I did it because it was an incredible experience. It was like the Grammy awards all over again."
Tyler had the consolation of outshining Ireland's entry, sung by Ryan Dolan, who finished last after Only Love Survives received just five points.
Overnight viewing figures showed that an average of 7.7 million people tuned into the contest in the UK on BBC1, reaching a peak of 9.2 million at 10.45pm–11pm.
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