A total of 500.5 million albums sold as CDs, cassettes, LPs and other formats were purchased last year, down 15 percent from 2006's unit total, said Nielsen SoundScan, which tracks point-of-purchase sales.
Last year, Apple Inc.'s iTunes Music Store became the third-largest music retailer in the U.S.
Nielsen does not provide revenue figures.
Overall music purchases, including albums, singles, digital tracks and music videos, rose to 1.35 billion units, up 14 percent from 2006.
The recording industry has seen CD album sales decline for years, in part due to the rise of online file-sharing, but also as consumers have spent more of their leisure dollars on other entertainment purchases, such as DVDs and video games.
Warner Music Group Corp. artist Josh Groban had the best-selling album with "Noel." The album, a collection of Christmas songs, sold around 3.7 million copies.
A soundtrack for The Walt Disney Co.'s popular "High School Musical" franchise was second with around 2.9 million units sold.
The Eagles' comeback album, "Long Road Out of Eden," scored the third spot, selling around 2.6 million copies, despite being independently released and available for purchase only at Wal-Mart stores.
Three out of the five top-selling albums for the year were released late in the fourth quarter.
Among last year's other top selling albums were a "Hannah Montana" soundtrack and offerings from Alicia Keys, Fergie and "American Idol" alum Doughtry.
The major recording companies' album market share remained ostensibly the same from 2006, with Vivendi SA's Universal Music Group holding a 31.9 percent share, up slightly from the previous year.
Sony BMG Music Entertainment, a joint venture of Sony Corp. and Bertelsmann AG, continued to rank second with 24.97 percent, though it dropped 2.4 percent from 2006.
Warner Music remained third-largest, with a 20.2 percent share, an increase of 2.1 percent.
Britain's EMI Group PLC ranked fourth among the majors, with a 9.3 percent share, down nearly 1 percent.
The decision by some major recording artists to push back album releases initially anticipated for the fourth quarter last year may have contributed to the decline in album sales.
One trend that should prove encouraging to record labels: 50 million albums were downloaded last year, a 53 percent uptick.
"That says consumers are embracing both the track format and the digital album format," said Rob Sisco, president of Nielsen Music.
In all, 23 percent of music sales were derived from digital purchases, Sisco said.
A report released in November by Jupiter Research LLC forecast digital music sales will continue to grow to $2.8 billion, comprising 34 percent of U.S. consumer spending on music in 2012.
The recording industry continued to benefit from mobile music, with mobile phone owners buying 220 million ringtones, the firm said.
The holiday season brought an upswell of music purchases, with music sales in the last week of the year totaling 58.4 million units, the biggest sales week ever recorded by Nielsen SoundScan.
David Pakman, chief executive of eMusic.com Inc., attributed strong holiday sales at the online music retailer in part to an apparent pick up in sales of low-cost digital music players.
"That's showing us that digital music adoption is reaching into some price-sensitive areas," Pakman said.
EMusic subscribers downloaded nearly 500,000 tracks and audio books on Christmas Day alone. The company's paid subscriber base exceeded 400,000 at the close of the year.