Uefa will end its proceedings against the Italians for overspending, said the Court of Arbitration for Sport (Cas).
“AC Milan is excluded from Uefa club competitions of the sporting season 2019-2020,” said Cas.
Milan’s ban means AS Roma, who came sixth in the standings, move up to the Europa League group stage while their place in the qualifying rounds is taken by seventh-placed Torino.
Seven-time European champions Milan finished one point behind local rivals Inter, who took the final Champions League qualifying place.
Milan previously successfully appealed against a two-year ban imposed by Uefa last summer after being found guilty of breaking spending rules between 2015 and 2017.
Under Uefa regulations, any club making losses beyond the permitted limits over a three-year period faces possible sanctions, and in some circumstances, a ban.
Milan were able to take part in last season’s Europa League – going out in the group stage – after appealing to Cas.
BBC Sport’s David Ornstein
It is understood this ruling was requested by Milan as part of their overall FFP settlement agreement with Uefa.
Last year, Milan were banned from the Europa League but then reinstated by Cas following an appeal.
This year, Milan agreed to take the ban as it was in the mutual interests of both the club and Uefa.
It is likely to earn Milan a more favourable ruling from Uefa in terms of their overall FFP predicament, as they face breaches in the 2016-17, 2017-18 and 2018-19 seasons.
The ban allows Uefa to shows the world they’re clamping down, while Milan get some breathing space in their efforts to move into a more stable financial position.