FIFA says its appeal panel upheld the original verdict imposed on Simunic in December.
Simunic can appeal to the Court of Arbitration for Sport before Croatia opens the World Cup against host Brazil on June 12.
The 36-year-old Australia-born player was expected to play at his third World Cup after Croatia beat Iceland in a playoff in November.
After winning 2-0 in the second leg in Zagreb, Simunic took a microphone on the pitch and invoked a World War II-era slogan used
by Croatia's fascist regime.