The 26-year-old midfielder, who has been at Oxford since July 2006, was transfer-listed last January by former boss Darren Patterson and did not warm-up for the new season with the first team at HMS Collingwood.
He has scored two goals in 19 games for United this season, and helped Oxford earn 11 points before the error was discovered in November.
Clubs are obliged to re-register players at the start of every campaign and make sure the Conference has received their registration.
We'll wait to get all the information from the hearing before we rush to judgement
Oxford chairman Kelvin Thomas
The club had been hoping to return to the Football League at the third time of asking, following their relegation from League Two in 2005/06.
Chairman Kelvin Thomas told BBC Oxford: "We're obviously very disappointed in the panel's decision - we presented our case and I think we were given a fair hearing.
"The decision is something that disappoints us. We will consider an appeal. We'll wait to get all the information from the hearing before we rush to judgement.
"We have 14 days from today [Monday] to appeal the decision."
There is also a further fine of £3,500 suspended until May 2010.
The U's, who are now just five points above the relegation zone, would have been 14 points off the play-offs but Crawley were also deducted four points for a similar offence on Monday.
Meanwhile, United will play Ilkeston or Kidderminster away in the FA Trophy third round if they beat York on Tuesday.
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