World bronze medallist Phogat, 29, was in the public eye for months last year as part of a long-running protest against the then-chief of Indian wrestling when he was embroiled in a sexual harassment scandal.
Phogat, who has won three Commonwealth Games gold medals, had been due to face Sarah Hildebrandt of the United States for the gold medal on Wednesday in Paris but was found to be 100 grams over the 50kg limit.
"Mother wrestling won against me, I lost. Your dreams and my courage are shattered," Phogat wrote on social media platform X.
"I don't have any more strength now. Goodbye wrestling 2001-2024. I will forever be indebted to you all. Sorry."
Hildebrandt took gold in Wednesday final against Cuba's Yusneylis Guzman Lopez, who was reprieved after losing her semi-final to Phogat on Tuesday.
Indian media reported Phogat has appealed to the Court of Arbitration for Sport (CAS) against her disqualification and demanded a joint silver to be awarded.
CAS is expected to announce its verdict on the case later Thursday in Paris.
'A winner for us'
Videos of Phogat with chopped hair and sunken eyes, working out to cut her weight down in a last bid to compete in the final went viral on Wednesday.
Phogat helped lead a weeks-long sit-in protest in New Delhi last year against then-Wrestling Federation of India chief Brij Bhushan Sharan Singh, at the time a lawmaker from Prime Minister Narendra Modi's ruling party.
Singh is being tried on accusations of groping female athletes and demanding sexual favours from them -- charges he denied.
Wrestling is hugely popular in rural northern India and images of Phogat and other athletes being detained as they tried to march to parliament during the protest went viral on social media.
"You will always remain a winner for us," Bajrang Punia, a fellow leader of last year's protests, and a Tokyo Olympics bronze medallist, said on social media.
"Apart from being India's daughter, you are the pride of India."
Another fellow protest wrestler and Olympic bronze-medallist, Sakshee Malikkh, said "every daughter has lost for whom you fought and won".
Phogat, who passed the weigh-in on day one, stunned four-time world and defending Olympic champion Yui Susaki of Japan in the opener with a late takedown to claim a 3-2 decision en route to the final.
But Phogat was overweight on the morning of the final, despite the wrestler and her team working overnight to cut the kilos through exercising and sauna.
Modi had backed Phogat in a social media post, saying: "I wish words could express the sense of despair that I am experiencing".
