The Brokeback Mountain star fled to Canada in 2010 with his wife Evi after they were arrested for illegally squatting at a home in Montecito, California.
The Quaids applied for refugee status, claiming they were being persecuted by ""Hollywood star whackers"", and Evi, whose father is Canadian, was subsequently granted citizenship.
But Canadian immigration officials have turned down Quaid's request for permanent residency status, The Associated Press reports.
The Hollywood star can appeal the decision to the federal court.
American authorities have refused to seek the Quaids' extradition, but will arrest the couple if they return to the United States.