Myuran Sukumaran from Sydney was one of nine Australians arrested in Bali in April 2005 with more than 8.3kg (18lb) of heroin.
Sukumaran and Andrew Chan were named as ring leaders of the group and sentenced to death in 2006.
Indonesian President Joko Widodo has said he will not give clemency to any of the 64 drug smugglers on death row.
The eight men and one woman of the Bali Nine were aged between 18 and 28 at the time of their arrests.
Following various appeals, the other seven are now serving either life or 20 years in prison.
A letter rejecting clemency for Sukumaran was delivered to Kerobokan prison in Bali by a government official on Wednesday, according to Australian reports.
It was printed on the letterhead of "Presiden Republik Indonesia" and had Mr Widodo's name printed underneath, reported Fairfax Media.
He is now expected to face execution by firing squad. It is not clear whether Chan has had a similar rejection of clemency.
Australia opposes the death penalty and Prime Minister Tony Abbott told reporters the government would continue to make representations on behalf of Australians facing execution in overseas jurisdictions.
However, Mr Abbott said he did not want to damage ties with Indonesia, which is both a major trading ally and key to Australia's efforts to reduce asylum-seeker numbers.
"My hope is that these executions will not go ahead," he said. "What I am not going to do, though, is jeopardise the relationship with Indonesia. That would be foolish."
Sukumaran's family and lawyers had hoped his good behaviour in prison would win him a reprieve from the president.
He told Fairfax Media that he and Chan had changed over the past decade.
"We don't deserve to be executed. Our families shouldn't have to suffer like this," he reportedly said through an intermediary.
"My mum's on the floor, tears, crying and can't talk. My sister is in tears and can't talk. My brother's so shocked he didn't even know what to say. I've been walking around feeling like someone's punched me in the stomach.
Indonesia resumed executions in 2013 after an unofficial four-year moratorium.
No executions were carried out in 2014, but Mr Widodo is reported to have authorised the executions of five prisoners in December - a move condemned by rights groups.
One of the "Bali Nine" Australian drug smugglers has lost his final bid to escape execution in Indonesia.