The world football federation (FIFA) rejected the appeals of Real and Atlético, which means that the Madrid clubs will not be able to register players in the next two transfer windows.
The clubs that met in the Luge Champions final at the end of May were fined back in January for violating the regulations related to the protection and transfer of minors.
Atletico was also fined 900.000, and Real 360.000 Swiss francs.
"The FIFA Appeals Committee has decided to reject the appeals of the Spanish clubs Atlético and Real Madrid and to confirm the original decisions made by the FIFA Disciplinary Committee. Both clubs are banned from registering players at national and international level for the next two consecutive transfer periods," FIFA said.
The investigation includes minors who played in competitions for Atlético from 2007 to 2014 and Real, between 2005 and 2014.
More than a year ago, FIFA punished Barcelona in the same way for the same problem, which only got the right to register new players this January.
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