MyFerryLink, which sails Dover-Calais, has been told that operations “must cease”.
Eurotunnel has been banned from operating the ferry service it initiated in August 2012.
The Competition and Markets Authority (CMA) has confirmed a decision taken earlier that the company must not run its MyFerryLink service from Dover.
The CMA believes that current competition on the ferry route is not sustainable.
MyFerryLink said it disagreed with the CMA and would appeal. Sailings would continue beyond summer, it added.
The CMA said two other Dover-Calais operators were making losses and any exit of a competitor would leave MyFerryLink as one of only two ferry operators, in addition to the competing rail link.
Eurotunnel planned to buy three ferries which has belonged to the former SeaFrance, and this would give MyFerryLink more than half the market.
It would be better for passengers and freight operators to have three competing operators which would be Eurotunnel's rail link and two independent ferry operators, the CMA believes.
The CMA said it would not stop Eurotunnel finding an independent purchaser to buy and run its ferry service.
Eurotunnel has been given six months to stop the ferries.
"Given that any appeal is unlikely to be finally determined until much later this year at the earliest, we would like to reassure our loyal customers that we will continue to operate our full schedule throughout the summer season and beyond," a statement added.
Rival firms P&O Ferries and DFDS Seaways, however, both welcomed the CMA decision.
