The decision prevents the American from having any chance of competing at the Paris Olympics which begin on July 26. The US Swimming Olympic trials begin on Saturday.
Thomas became the first transgender NCAA champion in Division I history but soon after World Aquatics (then called FINA) voted to restrict the participation of transgender athletes in elite women's competitions.
Thomas, 25, had lodged a case with CAS in January in a bid to overturn the ban and compete in elite female races again, arguing that the provisions are not only "invalid and unlawful" but also discriminate against her.
However, a three-member panel in the sport's top court dismissed the case.
The panel concluded that since Thomas is not entitled to participate in USA Swimming's elite events, "she is simply not entitled to engage with eligibility to compete" in World Aquatics competitions.
"The panel concludes that since the athlete is not entitled to participate in 'Elite Events' within the meaning of USA Swimming Policy, let alone to compete in a WA competition... she is simply not entitled to engage with eligibility to compete in WA competitions," it said.
World Aquatics welcomed the decision made by CAS which they said was a "major step forward" in their efforts to protect women's sport.
"World Aquatics is dedicated to fostering an environment that promotes fairness, respect, and equal opportunities for athletes of all genders and we reaffirm this pledge," it said.
"Our policies and practices are continuously evaluated to ensure they align with these core values, which led to the introduction of our open category.
"We remain committed to working collaboratively with all stakeholders to uphold the principles of inclusivity in aquatic sports and remain confident that our gender inclusion policy represents a fair approach."
Thomas shot to prominence when she won the women's 500-yard freestyle in 2022 and had expressed a desire to compete for a place at the Olympics before the new rule was adopted by World Aquatics.
The new eligibility policy stated that male-to-female transgender athletes are eligible to compete only if they can establish to World Aquatics' "comfortable satisfaction that they have not experienced any part of male puberty beyond Tanner Stage 2 (of puberty) or before age 12, whichever is later".
The policy eventually led to several other sports governing bodies -- such as World Athletics -- making the decision to ban transgender women who had gone through male puberty from elite female competitions.
