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The two-time gold medallist was dropped from Rowing New Zealand's elite men's squad, effectively ending his dream of becoming the oldest single sculls champion at the upcoming Tokyo Games.
The 42-year-old Drysdale lost his spot in the single sculls to 25-year-old Jordan Parry, who was a stand-out at the recent men's trials.
Drysdale had been struggling with form of late and finished fourth in the national championships at Lake Ruataniwha last month.
The New Zealand rowing team will be named on June 11, but with no World Cup racing in Europe for the team, it is unlikely the athletes named in the boats will lose their places for the Olympics.
Rowing New Zealand will send a men's eight to the final Olympic qualifying regatta in Lucerne in May, where they have to finish in the top two to qualify for Tokyo.
Drysdale won a bronze medal at the 2008 Beijing Games and back-to-back golds at the London and Rio de Janeiro Olympics respectively.
He is also a five-time single sculls world champion and a record five-time winner of the sportsman of the year Halberg award.