Thorpe overbalanced on the blocks and fell into the water before the start of his heat on the opening day of the eight-day Australian championships at Sydney's Olympic pool.
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An appeal by Thorpe was unsuccessful and the disqualification would stand, Australian Swimming (AS) chief executive Glenn Tasker told a news conference.
Tasker said Thorpe lodged an appeal with the referee and it was dismissed.
Thorpe, Australia's highest-profile swimmer and a hot favourite in his pet event, the 400m freestyle, then went to an AS jury of appeal.
PROTEST DOCUMENT
"Having read the protest document, the response of the referee and having interviewed the referee, the competitor and the team manager, the jury determined it would also view the broadcaster's video," Tasker said.
"Having done that, it is our determination that the referee's decision is correct and a determination of fact, the protest is dismissed, so Ian's disqualification stands."
The policy of the AS allows only the first two at the trials to compete at the Olympics.
"It's not easy but it's the rules and we have to abide by the rules which are there," said AS president John Devitt.
Thorpe's manager Dave Flaskas said the world champion, who had hoped to swim the 100, 200 and 400 metres individual freestyle events and three relays in Athens in August, heard a noise before he fell into the water.
"Ian thought they were held a bit too long (on the blocks) and he heard a noise. The audiovisual does not show that noise, so evidence-wise it is a bit difficult," Flaskas said.
"He is obviously disappointed but I think it is important he gets re-focused on the rest of the meet. He and (coach) Tracey Menzies are regrouping.
"He has not said a lot. He is disappointed and absorbing it all at the moment and we cannot dwell on it and this is day one and he has major swims over the next few days and that is where his head has to be at."