The 2010 World Championship bronze medallist, has been assessed on three previous occasions and classified as a 'B3' competitor, the lowest category for those with a registered disability.
However, results from tests in Crawley on Wednesday show the 49-year-old does not have a level of visual impairment to complete in VI tournaments.
"We are all very shocked and disappointed at the outcome, British Judo's Performance Programme Manager Dave Sanders.
"Whilst I agree sight classification needs to be more robust and equal, I am quite surprised to see such significant changes 10 months out from the Paralympic Games - and without prior notification."
The +78kg fighter, who began losing her eye-sight in 2004 and was forced to stop driving, only joined the GB setup in early 2010.
Reid's World Championship bronze medal in Turkey last year came in her first competitive international event and although she would by 50-years-old next summer after securing a silver at the 2011 IBSA World Games, was expected to be a strong contender for a medal at the 2012 Paralympic Games.
"I am so sad that I might not be able to see this through to the end, but I do not regret any of it," said Lesley.
"I have had the most incredible two years and achieved things that I would never have thought possible."
A number of international fighters have also failed to make the classification requirements this week, however, British Judo have confirmed that they are now reviewing all of Lesley's previous tests and hope to have the decision reviewed by IBSA officials in the coming weeks.
Meanwhile, Great Britain's top visually impaired judoka Ben Quilter is aiming for top of the podium at the Championships in West Sussex.
Quilter, in the under-60kg category, is part of a four-strong British team that will compete against Europe's top players in Crawley.
The 30-year-old said: "Having won two world titles in 2010 and 2011 I have been on form.
"I'm hoping to add to my medal collection with a European gold."
Sam Ingram, a bronze medallist at the 2008 Beijing Paralympics, competes at -90kg, while Liverpudlian brothers Marc and Daniel Powell are bidding for their first European medals in the under-73kg and under-81kg categories respectively.
Paralympic performance coach Jean-Paul Bell said: "All of the players have worked hard over the last two years and it is a great chance for them to test themselves against the best visually impaired players in Europe."