Edward McMillan-Scott said he was preparing a High Court challenge for reinstatement - and mounting a pro-European campaign to counter Conservative anti-EU rhetoric ahead of the general election.
Mr McMillan-Scott, an MEP for 25 years, lost the Tory whip six months ago after breaking ranks to challenge a Polish MEP for the post of European Parliament vice-president.
Mr McMillan-Scott won, and his defeat of the controversial Pole, Michal Kaminski, infuriated Tory high command because Mr Kaminksi's Law and Justice Party had just joined forces with the Conservatives in Strasbourg to form a new Eurosceptic political bloc.
Mr McMillan-Scott says he acted in protest at Mr Kaminski's "anti-Semitic, homophobic and racist" links.
The result was expulsion from the Tory party in September, and now the rejection of his appeal for reinstatement which was heard by a panel of three Conservative party officials.
The MEP said he would now sit as an independent Tory in Strasbourg, still representing his Yorkshire and Humberside constituency with, he says, the backing of the vast majority at home, including the constituency party.
He said: "I stood against Kaminski because he represented the rise of disguised extremism at a key moment in European politics - the start of a new European Parliament which saw gains by the far right in 13 out of 27 EU countries, including the BNP in Britain."
The accusation is embarrassing for Tory leader David Cameron, who insisted the Tory MEPs form a group with other Eurosceptics.
Mr Kaminksi is now leader of that group, effectively in charge of the British euro-Tories, but Mr McMillan-Scott insisted: "Kaminski is totally unsuitable to be leader of the group."
The MEP revealed that part of his campaign against the Pole and totalitarianism was the fact that Mr McMillan-Scott's maternal grandparents were interned by Winston Churchill as senior members of the British Union of Fascists.
The MEP is also driven by his growing concern about Tory Eurosceptic tendencies.
"As a Conservative Party member for 42 years, an MEP for 25 years, leader of the MEPs for four years and a Conservative Board member for three years, this is no longer the party I knew."
He said when he had "signed the pledge" with other Tory MEPs to leave a longstanding pro-EU alliance in Strasbourg and form a more Eurosceptic group, it was not known that the Conservatives were prepared to have the Polish Law and Justice Party among its new political bedfellows.
Mr McMillan-Scott said his expulsion had been unfair, adding: "There is no shame in losing the whip on a point of principle - to be expelled for the same thing was disproportionate and against natural justice."
He said the only recent expulsions had been Jeffrey Archer in 2001, following imprisonment for perjury, and Den Dover, a former MP and MEP, last year for allegedly misusing £600,000 of euro-expenses.
Mr McMillan-Scott went on: "In the context of the Westminster expenses scandal, for which no Conservative was expelled, or the serial disloyalty of Europhobes like (Tory MEP) Daniel Hannan, this will be seen by many as a serious case of double standards."
He described Mr Hannan as "Dog-whistle Dan, the deniable Ukip voice of the Tory Party" and added: "Dan is more interested in UK independence than in the Conservative Party - he should be expelled, not me."
Meanwhile, Mr McMillan-Scott admitted he was still fuming about an "abusive, humiliating" letter from Foreign Secretary William Hague, ordering the MEP to apologise to Mr Kaminski and to Tory group leader Timothy Kirkhope.
A "childish" decision by Mr Kirkhope to insist that the entire Tory group "send me to Coventry" has not helped.
Mr McMillan-Scott remarked: "They can take me out of the Conservative Party but they cannot take the Conservative out of me, but even my loyalty is now stretched.
"Pro-European voices (within the party) have been stilled of late, and now I intend to speak out."
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