Phogat had been set to lock horns with Sarah Hildebrandt of the United States for the gold medal. The disqualification means she will not receive a medal of any colour.
"It is with regret that the Indian contingent shares news of the disqualification of Vinesh Phogat from the women's wrestling 50kg class," the IOA said in a statement.
"Despite the best efforts by the team through the night, she weighed in a few grams over 50kg this morning."
The news brought an outpouring of sympathy for her compatriots, with Indian Prime Minister Narendra Modi describing her as a "champion among champions" on social media platform X.
"You are India's pride and an inspiration for each and every Indian," Modi said.
"Today's setback hurts. I wish words could express the sense of despair that I am experiencing. At the same time, I know that you epitomise resilience. It has always been your nature to take challenges head on.
"Come back stronger! We are all rooting for you."
Shooter Abhinav Bindra, who won India's first individual Olympic gold in 2008, said he was "completely gutted".
"Sometimes you don't need a gold medal to be a true champion to people," he added.
Phogat was one of several Indian wrestlers who came out in protest last year seeking criminal action against Brij Bhushan Sharan Singh, then chief of the Wrestling Federation of India and a part of Modi's Bharatiya Janata Party.
Singh has denied any wrongdoing following complaints by women wrestlers.
