The UK-based rider, who was born in Dunedin and raised in Outram, will miss the London Games after his mount Orient Express suffered a leg injury.
The 25-year-old was part of the New Zealand team that won bronze at the 2010 world championships and was expected to be named in the New Zealand Olympic eventing team last night.
Speaking from Gloucestershire, he said it was "pretty gutting" finding out he was out of Olympic contention because the horse he affectionately calls Blue had a leg injury.
He had been having few issues with his horse this year, but thought they had "come right at the last minute" after he went well at the Barbury Castle International Horse Trials at the weekend.
He said he was still taking in the news, and was not sure what his immediate plans were, but had not given up on his Olympic dream.
"It won't be the last Olympics, so I just have look forward to the next one and try and be ready for that."
He was grateful for the "overwhelming" support he had received from "back home" since finding out he was not in the team.
"I have constantly been getting texts, and Facebook messages and calls. It's been really nice to have that support."
He would keep a close eye on the New Zealand eventing team at the Olympics, which he said had a good chance of success.
"Everyone over here really sees ... [them] as being strong medal contenders."
There was also a "good chance" of individual medals, especially for Andrew Nicholson, he said.
His mother Jean Johnstone, who lives in Outram, said the family was hurting.
"We are all feeling really sorry for Clarke, but you have to be philosophical about these things," she said.
"It happens with horses. This [injury] came from left-field and we didn't see it coming.
"But Clarke is only 25 and Mark Todd is 55, so we've got a few more chances."
Her son was in a sombre mood when he spoke to his mother on the phone.
But the disappointment had only made him more determined, she said.
