As a result, the seven-times European champions will not participate in the 2019-20 Europa League which they qualified for by finishing fifth in Serie A last season.
Milan's ban means that AS Roma, who finished sixth in the standings, move up to the group stage of Europe's second-tier club competition while their place in the qualifying rounds is taken by seventh-placed Torino.
"CAS has issued a consent award embodying the agreement reached between AC Milan and UEFA concerning breaches of the FFP regulations by the Italian club," the Court of Arbitration for Sport said in a statement.
"AC Milan is excluded from participating in the UEFA club competitions of the sporting season 2019/2020 as a consequence of the breach of its FFP break-even obligations during the 2015/2016/2017 and the 2016/2017/2018 monitoring periods."
Under UEFA regulations any club spending more than the revenue they generate may face sanctions, including a possible ban from the competitions run by the European governing body.
Milan said they had inherited "substantial accumulated losses" from their former owner and had no other choice but to accept the ban and settle the breaches.
U.S. activist fund Elliott took control of the club last year as previous owner, Chinese businessman Li Yonghong, defaulted on his obligations toward the club.
"These losses and the associated violation of FFP rules, as a consequence of actions taken under previous ownership, led to sanctions by UEFA," Milan said in a statement.
"Whilst saddened by the fact that our fans will not be able to see their team compete in European competition next season, the club recognises and respects FFP."
Milan is expected to end 2018-19 with a loss of around 80 million euros (72 million pounds), a source close to matter said.
"Today's ruling will act as a stimulus to maximize efforts to become fully compliant with FFP, while at the same time consolidating the competitiveness of the club and returning Milan to sustainability and a more positive future," they added.
In April, Milan were reported by UEFA investigators over an alleged new breach of the break-even rule in its most recent monitoring period and the case was passed to its financial adjudicators.
UEFA said the referral was not connected to a previous case against Milan which saw the club banned and reprieved on appeal.
Milan were given a one-season suspension from European football in June last year after UEFA ruled that the club had not complied with FFP rules for the previous monitoring period.
Milan appealed to CAS which overturned the ban the following month, accepting the club's argument that its finances had improved after an ownership change.
Milan were then able to take part in last season's Europa League, which they exited in the group stage, while UEFA was ordered by CAS to find an alternative punishment.
In its revised decision in December, UEFA gave Milan until June 2021 to comply with the rules or face a one-season ban from European competition.
(Reporting by Shrivathsa Sridhar in Bengaluru and Elvira Pollina; Editing by Christian Radnedge and Ken Ferris)
