The contest in the Oban North and Lorn constituency was triggered after independent councillor Duncan McIntyre resigned due to ill-health in December.
The SNP's Julie McKenzie won the seat with 1,113 first-preference votes.
Andrew Vennard of the Conservatives came second with 609 first-preference votes, with independent candidate Kieron Green one vote behind in third. Turnout was 33.84%.
The council is controlled by a coalition of independents, Conservatives and Liberal Democrats.
SNP business convener Derek Mackay hailed a "fantastic result", adding: "This is the latest evidence that the party's extraordinary success continues - marking the 27th win for the SNP in the 30 by-elections that have been held since May 2015."
Scottish Conservative leader Ruth Davidson said she was pleased to see the Tory vote up by 14.1% in the election.
The SNP has gained a seat on Argyll and Bute Council following a by-election.