The Tigers' fans favourite has failed in his attempts to overturn the decision by the club's chairman to have him sacked following his criticism of transfer policy
Barmby returned to his hometown club as a player eight years ago following spells at Tottenham, Middlesbrough, Everton and Liverpool.
The former England international took over as caretaker boss in November 2011 before being appointed permanent manager in January. However, Barmby's public criticism of the club's transfer policy led to Tigers chairman Assem Allam first suspending and then sacking the former Leeds man.
"It goes without saying that I am very disappointed that there wasn't a favourable outcome to my appeal against my dismissal as manager of Hull City FC," Barmby told reporters.
"I was surprised that the club did not appoint an independent person to hear the appeal and I am now considering the outcome in detail and will consult with the LMA's legal team before deciding on any further action."
Hull owner Assem Allam released a statement following the decision which read: "I have decided to uphold the decision to dismiss Nick for reasons previously stated.
"I would like to assure the club's supporters that this decision has not been taken lightly and all other options were explored before I decided to uphold the dismissal.
"Nick's behaviour has led to the breakdown of trust and confidence with the board and I therefore felt I had no other option."
In eight years at the club the Hull-born midfielder has appeared 180 times, scoring 26 goals, after signing from Leeds in 2004.
He was an integral member of Phil Brown's side which secured the club's first season in the English top flight with promotion through the Championship play-offs in 2008.
Allam paid tribute to Barmby as a player, and revealed his disappointment at the way his career at the club came to a close.
"Nick was a fantastic player for the club and a local hero to the club's supporters.
"It is an extremely unfortunate end to a great period with the club, although the club would like the supporters to remember Nick for his playing career and the part he played in the club’s promotions."