Crystal Palace have lost their appeal to the Court of Arbitration of Sport (CAS) over being reinstated to the Europa League.
Palace were demoted to the Conference League after breaking UEFA's rules on multi-club ownership.
The Premier League club's former shareholder John Textor is also the majority owner of Lyon, who qualified for the Europa League last season.
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Crystal Palace have had their appeal rejected by CAS
|PA
The Eagles also qualified for the competition initially after beating Manchester City to win the FA Cup but, because Textor had failed to put his shares in a blind trust before the March 1 deadline, Palace were demoted to the Conference League by UEFA.
Textor's Eagle Holdings company held a 43 per cent stake in Palace while his firm also Lyon.
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The French club were given priority over Palace in the Europa League, as they finished higher in their domestic league.
That decision was appealed by Palace immediately to the CAS.
However, the CAS have sided with UEFA over their decision to ban Palace from the Europa League - meaning they will now play in the Conference League instead.
That decision is set to have major financial ramifications for the south London club, with the total cost set to potentially come to £20million.
Palace had expected more cash in revenue by playing in the Europa League, which also guarantees more prize money compared to the Conference League.
The newly-crowned Community Shield winners have been largely in limbo this summer, unable to act in the transfer window without full disclosure over their financial situation.
And the CAS decision will be a brutal blow to manager Oliver Glasner, who had been desperate for reinforcements before the end of the transfer window later this month.
It will also see Nottingham Forest promoted to the Europa League.
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Lyon owner John Textor sold his shares in Crystal Palace, but it still didn't clear the way for Europa League qualification | GettyPalace chairman Steve Parish attended a gruelling 10-hour hearing on Friday to plead his club's case to three CAS judges in Lausanne and insisted that 'common sense' dictates that they should play in the Europa League.
"It should do," Parish said after Palace beat Premier League champions Liverpool in the Community Shield at Wembley. "If there's any justice in the world, it will do.
"I haven't spoken to anybody yet who really thinks that we shouldn't have our Europa League place.
"We have put forward a very compelling case across a number of issues, I trust the Court of Arbitration comes to the right decision. It's a strange process but one that very weirdly pits clubs against each other in some way.
"But I think we should be in the Europa League. I think everybody outside of a very few people think we should be in the Europa League. Common sense should prevail and that's where we should be. Let's hope that's the decision."
Steve Parish and Crystal Palace will be furious with the decision to reject their appeal
| GettyPalace's relegation to Europe's third-tier competition will come at a cost to the club - amounting to a potential £20m in revenue.
The club's next action could see them claim compensation in European courts while they could also sue their former shareholder Textor over damages.
The American businessman sold his 43 per cent stake in Palace to New York Jets owner Woody Johnson in June in a bid to comply with UEFA guidelines but it has proved in vain.
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