A joint bid by Belfast and Londonderry to hold the title for 2023 was being considered, but a new ruling means no UK city can receive the accolade after the UK leaves the EU in 2019.
The decision has sparked widespread anger as two non-EU cities – Istanbul and Reykjavik – have been named European Capital of Culture in previous years.
Mr Nicholson was one of a number of political and business figures to slam Brussels over the ban.
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He said: “The European Commission’s decision to block United Kingdom cities from being European Capital of Culture in 2023 defies belief.
“Firstly, in the discourse surrounding the Brexit negotiations, much is made of the United Kingdom’s rights and obligations as an EU member state until we leave the European Union.
“While we are of course negotiating our departure, we are still contributing to the EU budget and have all the rights and obligations that come with EU membership.
“Secondly, the decision for a UK city to be awarded European Capital of Culture in 2023 was taken in 2014.
“Since then, five candidates from the UK have already spent time and resources in preparing their bids. In particular, Belfast and Londonderry have done great preparatory work, showcasing Northern Ireland at its best and promoting culture as a way to unite all communities. It seems spiteful for Brussels to take away that opportunity now.”
SDLP leader Colum Eastwood has urged the Irish government to intervene.
“This is deeply disappointing for the people of the two cities (Belfast and Londonderry) and for those who have worked so hard to progress the joint bid,” he said.
“The SDLP has today written directly to the EU Commission to ask that we are treated as a special case. I’ve also made contact with the Irish government to ask for their immediate intervention with the EU Commission to ask that the bid for the two cities on the island of Ireland can proceed.”
A spokesperson for Belfast City Council said it was “deeply disappointed with this recent development,” but said it remains “committed to ensuring that the time, energy, enthusiasm, ideas and resources put into our bid are carried forward regardless”.