The mishap occurred in front of a packed audience that included Prime Minister Benjamin Netanyahu and was broadcast live on national television.
The small robotic spacecraft, built by the non-profit SpaceIL and state-owned Israel Aerospace Industries, had hoped to match a feat that has only been achieved by the national space agencies of three countries: U.S., Russia and China.
"If at first you don't succeed, try try again," Netanyahu said. He vowed to put an Israeli spacecraft on the moon "intact" in the next two years.
Scientists, who were giddy with excitement only second earlier, were visibly distraught, and celebrations at viewing centers across the country were dashed.
President Reuven Rivlin hosted dozens of youngsters at his official residence. The children, some wearing white spacesuits, appeared confused as the crash unfolded.
"We are full of admiration for the wonderful people who brought the spacecraft to the moon," Rivlin said. "True, not as we had hoped, but we will succeed in the end."
The failure was a disappointing ending to a 6.5 million kilometer (4 million mile) lunar voyage, almost unprecedented in length, that was designed to conserve fuel and reduce price.
The spacecraft hitched a ride on the SpaceX Falcon rocket, launched from Florida in February.
For the past two months, Beresheet traveled around the Earth several times before entering lunar orbit in hopes of joining the exclusive club of countries that have made it to the moon.
The U.S. space agency NASA broadcast the landing attempt live on its dedicated TV channels, as well as online.
"While NASA regrets the end of the SpaceIL mission without a successful lunar landing of the Beresheet lander, we congratulate SpaceIL, the Israel Aerospace Industries and the state of Israel on the incredible accomplishment of sending the first privately funded mission into lunar orbit," said NASA Administrator Jim Bridenstine.
"Every attempt to reach new milestones holds opportunities for us to learn, adjust and progress," he added. "I have no doubt that Israel and SpaceIL will continue to explore and I look forward to celebrating their future achievements."