The pro-Beijing Hong Kong government has previously barred independence activists from standing for office, but Chow's ban is the first against a more moderate campaigner.
A candidate's nomination was determined invalid because a person who advocated "self-determination" or independence would not be able to uphold the city's basic law or fulfil his or her duties as a legislator, the government said in a press release on Saturday, without naming Chow.
Hong Kong's electoral affairs commission banned a 21-year-old pro-democracy activist from running in the island's by-election after it declared her running platform was contrary to the island's "basic law".
Ms. Agnes is a member of Demosisto, a political party co-founded by leading democracy campaigner Joshua Wong, who is now on bail after being jailed for his role in the 2014 rallies.
Chow, who had reportedly renounced her British citizenship and deferred her studies in order to stand, was one of the most recognisable faces of the umbrella movement protests of 2014.
Joseph Cheng, a political analyst at City University of Hong Kong, said the government's decision could rally Hong Kong residents behind pro-democracy candidates.
On behalf of Chow, Au Nok-hin will become the backup candidate of pro-democracy camp.
The latest decision is likely to fuel criticism that Hong Kong's government is looking to Beijing, which denies self-determination by the semi-autonomous territory.
Hong Kong is governed under the "One Country, Two Systems" model that allows for a high degree of autonomy and an independent judiciary but not full democracy.
It was rocked by almost three months of mostly peaceful street occupations in late 2014, demanding Beijing grant the city full democracy.
For their leading role in the demonstrations, council member Law and fellow activists Joshua Wong and Alex Chow were tried and sentenced to community service.
"Three years after the Umbrella Movement, in which tens of thousands of people in Hong Kong stood up for the right to universal suffrage, the Beijing and Hong Kong governments have redoubled efforts to undermine the already limited electoral rights people have in Hong Kong".
The name of the movement arose from the use of umbrellas as a tool for peaceful resistance against tear-gas shooting Hong Kong police during the protests. Wong received six months jail time, while Chow got seven months. "It is very hard to fight for the self-determination and democracy of Hong Kong [but] ... we will stand firm and we will not give up in our movement".