Otherwise, the nine times world champion will have to start the final grand prix of the season from the back of the grid on Lorenzo's home soil.
Italian Rossi leads the Spaniard, who is chasing his third MotoGP title, by seven points. They are the only riders still in contention.
The Malaysia incident has triggered one of the sport's biggest and most bitter controversies, with no love lost between Rossi and Marquez while Yamaha and Honda have waded in to support their riders.
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The row has also taken on a national dimension, with Italian media at loggerheads with their Spanish counterparts and fears there could be ugly scenes when Rossi turns up in Spain after initially indicating he might stay at home.
The International Motorcycling Federation (FIM) has said the situation is 'poisoning' the sport and replaced a scheduled Thursday pre-race news conference in Valencia with a meeting between riders and officials.
Lorenzo, whose chances would be boosted considerably by Rossi starting at the back, had asked for permission to participate in the CAS hearing but the court refused the request.
"Accordingly, the CAS arbitration will continue between Valentino Rossi and the FIM only," CAS said in a statement.
CAS is aiming to give a decision by Friday.
The penalty was imposed after stewards at Sepang decided Rossi caused Marquez to crash with a deliberate move that caused an outcry in Spain and divided MotoGP fans.
Honda Racing Corporation's executive vice-president Shuhei Nakamoto said on Monday the data from Marquez's bike showed the Spaniard's front brake lever had received a sudden impact that locked the front tyre, causing the crash.
"We believe that this pressure was a result of Rossi’s kick," he said.
The comment angered Yamaha, who replied on Tuesday with a statement attacking the use of "words that accuse Valentino Rossi of kicking Marc Marquez‘s bike. That is something not proven by the investigation of the Race Direction."
(Reporting by Neville Dalton, editing by Alan Baldwin)
