Pearce, the coach of the Great Britain men's team had initially been keen not rule out that option but has now accepted that it is "a sensible football decision".
It means players such as Arsenal's Jack Wilshere and Manchester United's Phil Jones and Chris Smalling, who are almost certain to go to Euro 2012 with England, will not be part of the Olympic team even though they are under 23.
The same applies to Wayne Rooney who could have been selected as an over-age player.
Pearce said: "We have had discussions as we come now to notifying the long list of the players who could potentially be selected and it is important to make clear what we have agreed regarding England players who will be at Euro 2012.
"We have agreed that any player who boards the plane to the European Championship in Ukraine and Poland will not be considered for selection to Team GB.
"It's a sensible football decision when you consider the demands on players, and it now leaves no room for doubt for players and their clubs about next summer and the two major tournaments."
The FA this week began notifying home associations and players of those on a long list for potential selection. Players are asked to confirm whether they would be available for selection.
Pearce's announcement will please club managers such as Arsenal's Arsene Wenger and Manchester United's Sir Alex Ferguson who have said it would be too much for players to play in both tournaments.
It has also been revealed the Olympic Stadium could have retractable seating installed over the running track after the London 2012 Games to make it more attractive to football fans.
West Ham, who are favourites to be chosen as the tenants, are looking at having the retractable seating as part of their new bid for the stadium.
The new tender process for the stadium is due to be announced next week and West Ham are the favourites to be chosen as the tenants.
The Olympic Park Legacy Company (OPLC) are expected to stipulate that any bids must guarantee that the running track remains in place to allow athletics events to take place - including the 2017 world athletics championships which is being hosted at the stadium.
That has led to some opposition from football fans who fear they will be too far away from the pitch. West Ham have asked designers to come up with a plan for seats that cover the track so that fans are closer to the action.
The seats could then be removed from the track when athletics events are to be staged. The cost of retractable seating could be as little as £10million.
West Ham did consider retractable seating after they beat Tottenham back in February to be named as the preferred bidders to take over the stadium and sources say the idea is figuring strongly in their plans for a new bid - especially now conversion costs would be covered from the public purse.
Their original deal to take over the stadium collapsed in October when the Government scrapped the agreement following a legal challenge by Tottenham and Leyton Orient which threatened London's bid for the 2017 world athletics championships.
Under that deal, West Ham and Newham Council would have taken on a 250-year lease and contributed to the conversion costs.
The new tender process is expected to stipulate that the stadium will be kept in public ownership and rented out.