The athlete, a world leading ILCA class sailor and former European champion who competed at last year's Tokyo Games for Greece, has been at odds with the national sailing federation and the HOC for years.
She was registered and competed under the Portuguese flag at this month's world championships in Texas, according to the race's official results.
"The (HOC) does not approve the participation of the athletes Vasileia Karachaliou - or any other Greek athlete for that matter - to compete at the Paris Olympics under the flag of another nation," the HOC said in a statement.
"Whatever differences there are that can be solved through discussions are no reason for a change in nationality," it said, adding the decision to stop her had been unanimous.
Karachaliou has complained for years over what she has said is a continuous lack of support and funds to compete internationally, while her relationship with the national sailing federation has been fractured.
Athletes can switch nationalities but those wanting to do so need a three-year period to have passed since they last represented their former country. This period can be reduced under special circumstances.
Nationality changes also require the approval of the national Olympic committee and the sports' federation and must then be ratified by the International Olympic Committee.