The Royal Armoured Corps have lost out in the Armstrong Cup match against the Estonian Defence League.
The eSports contest, the first meeting between the two teams, was played on 'ARMA 3' – a military strategy simulator.
It was the Estonian team who came out on top after four hours of action to win the inaugural Armstrong Cup.
The challenge for a match came from the British Army when they were visiting the Estonian base and the game compares well to the real-life situations military personnel could face.
Second Lieutenant Glen Hunter explained: "When it comes to actually playing a game in ARMA 3, you are very much in that first-person perspective the entire time.
"All the very basic lessons that we learned in basic training like how things are seen are all applicable because if somebody's shooting at you and there's no tracer, you need to identify where they are.
"The only way to do that is to fall back on the skills you've been taught using various methods to identify where the enemy is."
ARMA 3 provided the perfect platform for this military competition, according to event lead caster and video game designer Matthew Price.
He said: "ARMA 3 has kind of always had its roots set in that military simulator environment.
"You can set up scenarios. You can build environments and it perfectly lends itself towards what they were aiming for."
The Estonian Defence League's Rando Valjaots revealed that the challenge was laid down by the UK personnel.
"The British who visited the Estonian Defence League (EDL) headquarters threw up the challenge," he explained.
"I've been running an ARMA 3 community for the past six-and-a-half years."
The eSports community is becoming a growing force in the military world and 2Lt Hunter believes it is a valuable tool during the coronavirus pandemic.
He said: "The reality... is that especially now when we are stuck at home... it gives people an opportunity to sort of escape the reality of the same walls and being in the same house day after day after day."
The competition was curated and hosted by Sapper Oliver Nicholas. He founded an ARMA 3 community for active service personnel, veterans and gamers called the British Foreign Legion.