The Spain international picked up a third yellow card of the tournament early in the second leg at the Allianz Arena last week and will subsequently miss the final against city rivals Atletico Madrid on May 24.
Real appealed against the decision, but UEFA announced on Wednesday that they have upheld the influential midfielder's ban.
"Following the protest lodged by Real Madrid CF against the caution of their player Xabi Alonso at the return-leg of the UEFA Champions League semi-final against FC Bayern Munchen played on 29 April in Germany, the UEFA Control and Disciplinary Body has declared the protest inadmissible," the governing body stated.
"As a result of his third yellow card, the Spanish player is suspended and will therefore not be eligible for the UEFA Champions League final against Club Atletico de Madrid played on 24 May in Lisbon."
Coach Carlo Ancelotti could turn to Sami Khedira, who has returned from a serious knee injury, or Asier Illarramendi to cope with the absence of Alonso.
The Italian said he has faith in both players, although he acknowledged Khedira may lack match sharpness having not featured for club or country since November.
"(Illarramendi) can stand in for Xabi because he has the same attributes. He didn't play well against Valencia (on Sunday), but that has no bearing on the future," Ancelotti said this week.
"Khedira's fitness is getting better; he'll be available (for Wednesday's La Liga game with Real Valladolid) and could play. If he doesn't get many minutes we'll arrange a little match for him and (Alvaro) Arbeloa."
