O'Grady, who announced his retirement this week, told a newspaper on Wednesday that he had used the banned blood-booster erythropoietin (EPO) before the notorious 1998 Tour, where he became only the second Australian to wear the yellow jersey.
AOC secretary-general Craig Phillips contacted O'Grady by e-mail asking for his immediate resignation from the 10-member advisory body, the AOC said on Thursday.
"Members of our London Olympic team, who elected Stuart to the Athletes' Commission, are entitled to be angry knowing they had supported an athlete who had cheated," AOC president John Coates said in a statement.
"Athletes' Commission members are chosen for their qualities of integrity and leadership and by his admission Stuart does not deserve to be a member of that group."
The 1998 race was overshadowed by the scandal involving the Festina team, who were kicked off the race after a medical team member was arrested at the French border and customs officers seized banned substances.
O'Grady was listed by the French Senate report among 12 riders whose tests were said to be "suspicious" but he confirmed using EPO to the Adelaide Advertiser, insisting he had acted alone in sourcing it.
O'Grady announced his retirement after helping his GreenEdge team to a team time trial victory in this year's Tour, saying he wanted to go out on a high despite being expected to race on until 2014.
The Australian team said it supported O'Grady "as a person and an advocate for a clean sport".
"Like the majority of the riders in his generation, he was also exposed to the issues and wrongdoings of the sport and made some wrong choices in that environment," the team said in a statement on its website.
"We would like to underline that in all of our interactions with Stuart, he has always been extremely clear about the right path for the sport and we believe that certain mistakes in the past shouldn't be allowed to tarnish his entire career and his integrity as a person."
Cycling Australia also declined to condemn O'Grady, blaming the era and the European "environment".
"The late 1990's was clearly a dark period in cycling's international history," the governing body said in a statement.
"(Australian) Athletes transitioning from the strict anti-doping regimes enforced under the domestic ... programs were faced with a very different environment when they landed in Europe."
Coates, though, said the "everybody else was doing it" line was no defence for using banned substances.
"This was a shameful period for the sport of cycling which has been well documented, that is no excuse for the decision taken by Stuart O'Grady," he added.
(Editing by Nick Mulvenney)
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