Victor Nealon was living in Redditch, Worcestershire, when he was found guilty of attacking a woman and jailed for life.
In December, his conviction was quashed by the Court of Appeal after fresh DNA evidence came to light.
The Ministry of Justice (MoJ) has turned down a claim and said there was no automatic right to compensation.
A spokesperson for the MoJ said claims were dealt with on a case-by-case basis and that it would not comment on individual claims.
Mark Newby, Mr Nealon's solicitor, said his client was "very angry" about the decision and planned to challenge it.
Mr Nealon was arrested after a woman was sexually assaulted on her way home from a nightclub in Redditch in 1996.
Despite being jailed for life in January 1997, Mr Nealon always maintained his innocence.
Last month, the Criminal Cases Review Commission (CCRC) ,a body set up to investigate claims of miscarriages of justice, apologised after two previous appeals to have the case reviewed were turned down.
On the third attempt, the CCRC referred the case to the Court of Appeal.
Last year, three judges heard DNA material found on the the 22-year-old victim's blouse belonged to an "unknown male" and called into doubt the jury's original guilty verdict.
However, in turning down Mr Nealon's claim for compensation, the MoJ said the owner of the DNA could not be identified, and added it could not be established that it "undoubtedly belonged to the attacker".
A man who spent 17 years in jail after being wrongfully convicted of attempted rape has been denied compensation.