The 44-year-old singer-composer was long-listed in the category for his score 'Na na' in his Hollywood debut venture "Couple's Retreat".
'Na na' lost the race to 'Almost there' ("The Princess and the Frog" by Randy Newman); 'Down in New Orleans' ("The Princess and the Frog" by Newman); 'Loin de Paname' ("Paris 36" by Reinhardt Wagner and Frank Thomas); 'Take it all' ("Nine" by Maury Yeston) and 'The weary kind' ("Crazy Heart" by Ryan Bingham and T Bone Burnett).
The disappointment comes a day after Rahman's golden run yesterday at the 52nd Grammy Awards, where he bagged two gramophones for his music in the Danny Boyle film "Slumdog Millionaire".
'Na na', which marks the debut of Rahman's eight-year- old son A R Ameen, also features Rahman, Blaaze, Chaix, Clinton and Dominic. It is penned by Rahman, Blaaze and Vivian Chaix.
Marathi movie "Harishchandrachi Factory", India's official entry at the Oscars, had already been voted out of the race last month in the Foreign Language Film category.
The 'Mozart of Madras' created history last year when he won two Oscars for his composition in "Slumdog Millionaire", a first for an Indian.
The nominees for the 82nd Annual Academy Awards were announced by actress Anne Hathaway in a ceremony in Beverly Hills. The awards will be announced on March 7.