The New Zealand men's under-23 side were disqualified just hours before the final of Oceania's Olympic qualifying tournament in July for fielding an ineligible player.
The OFC on Friday rejected the appeal against the decision to disqualify New Zealand for selecting South Africa-born defender Deklan Wynne.
"We are bitterly disappointed," NZF Chief Executive Andy Martin said in a telephone interview from Auckland. "New Zealand Football has on several occasions sought clarity from FIFA and discussed the interpretation of player eligibility.
"We have applied a consistent interpretation that if a person moved to New Zealand as a child, had not played for another country, lived here for more than five years and gained citizenship then they were eligible to play for New Zealand.
"We have played in numerous FIFA and OFC competitions and have fielded players under this interpretation and never been challenged on player eligibility."
The "Oly-Whites" were thrown out of the Oceania competition in Papua New Guinea after an appeal by Vanuatu, who they had beaten 2-0 in the semi-finals.
An OFC panel ruled that Wynne was ineligible and overturned the result. Fiji went on to beat Vanuatu on penalties in the final to become the first Pacific Islands side to qualify for the Olympic soccer tournament.
REVIEW
NZF had conducted a review of all their teams since the initial decision and identified 16 players who could be in danger of breaching eligibility rules.
They had presented an initial 10 cases for approval for exemption from FIFA, eight of which had been granted, Martin said.
While Wynne was one of the two not yet to have been granted an exemption, Martin said his case was consistent with the eight approvals, but FIFA were seeking more information.
Martin said the appeal decision was still being scrutinised by NZF's lawyers, who would weigh up whether to take an appeal to the Court of Arbitration for Sport in Switzerland.
They have 21 days to appeal Friday's decision.
One of the concerns, he added, was that even if NZF won the eligibility appeal it was unclear as to whether the Oceania final could be replayed.
Relations with the other 10-member nations of the sparsely populated confederation would also need to be considered.
NZF went against their OFC colleagues in late May when they voted for FIFA presidential challenger Prince Ali bin Al Hussein instead of incumbent Sepp Blatter following the arrest of 14 leading soccer officials in a corruption scandal days before the governing body's election.
The OFC had previously unanimously agreed to back Blatter for a fifth term. The 79-year-old Swiss resigned just days after he was re-elected and has since been suspended for 90 days by the world governing body's Ethics Committee as it investigates a 2011 payment from FIFA to UEFA President Michel Platini.
(Reporting by Greg Stutchbury; Editing by Ian Ransom/Peter Rutherford)
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