The British Olympic Association has ratified Lutalo Muhammad's nomination for London 2012 ahead of Aaron Cook.
GB Taekwondo have overlooked the world number one three times in favour of Muhammad, ranked 59th in the world.
The move has been investigated by the BOA and, while they feel selectors acted properly, they were disappointed by the way the issue has been handled.
"There are two world-class athletes directly impacted by this nomination," read a statement issued by the BOA.
"Our panel would have preferred to see the selection process managed in a manner that would have been of much greater service to both athletes.
"That said, after a thorough review, the panel is now sufficiently satisfied that the agreed selection procedures have been followed, and it is on that basis we are ratifying the nomination."
GB Taekwondo welcomed the BOA decision.
Performance director Gary Hall said: "This has been a long and difficult process for all involved, for the selection panel members and particularly for the two athletes concerned. Both are outstanding candidates and truly world class, both capable of winning medals in London. This has been the most difficult of selection decisions."
Cook's camp is now considering whether to launch legal action.
"Aaron is naturally incredibly disappointed with the BOA decision," said his agent Jamie Cunningham.
"He should be competing in the 2012 Games. It is an absolute disgrace that a British world number one has not been selected for the London Olympics by either his governing body or Olympic Association.
"He is world number one, European champion and has beaten 10 of the top 15 athletes in the Olympic rankings in his most recent fights. What more could Aaron have done?
"We urge the World Taekwondo Federation to consider the ramifications of this flawed decision. Aaron will be considering whether he wishes to pursue a legal route to contest this decision over the weekend."
Bob Mitchell, solicitor at Harbottle & Lewis representing Aaron Cook, added: "Everyone is extremely disappointed by the outcome today. We have retained a leading sports QC and will be deciding over the weekend what the best way is to proceed for Aaron from a legal and sports perspective. A further statement is likely to be issued early next week."
The BOA's Olympic Qualification Standards panel can only accept or reject athlete nominations - it is not within its remit to select individual athletes. However, the BOA noted the importance of working closer with national governing bodies over selection policies for future Games.
The panel added it reserves the right to reconsider the nomination subject to an ongoing inquiry by the World Taekwondo Federation.