Ubolratana relinquished her royal titles in 1972 when she married Peter Jensen, an American and fellow student at the Massachusetts Institute of Technology.
Thailand is scheduled to hold its general election on March 24.
Thailand has been mired in political drama since last Friday, when Princess Ubolratana's name was submitted as a prime ministerial candidate by the Thai Raksa Chart Party.
The Thai princess has apologized after her short-lived candidacy for prime minister earned a royal rebuke from her brother - the king - and sent jitters across the politically febrile country just weeks before elections.
Thailand's wealthy and powerful monarchy is revered by Thais and protected by a draconian lese majeste law, and the king's word is seen as final.
The princess declared her candidacy for the populist Thai Raksa Chart party, which has links to exiled former Prime Minister Thaksin Shinawatra.
But she returned to Thailand in 1998 after they divorce and resumed her royal duties.
The country's election panel said it had excluded Princess Ubolratana because "every member of the royal family comes within the application of the same rule requiring the monarch to be above politics and to be politically neutral".
In a move possibly emboldened by the turmoil and uncertainty enveloping pro-Thaksin parties, the junta also announced a 15 day suspension of Voice TV, one of the more progressive Thai TV stations which is owned by Thaksin's children and often gives a platform to those critical of the military.
Although she said she was exercising her rights as a commoner to stand for premier, the palace statement last week said she is "still a member of the House of Chakri", referring to the name of the dynasty.
The row over the princess has reignited old rivalries.
Frustrated supporters of the pro-Thaksin camp, who have been waiting for five years to demonstrate their voting power, fear their side will be tarnished once again as a threat to the monarchy, in order to keep a military-dominated government in power.
"We are ready to be investigated".
The action against Thai Raksa Chart could strengthen both the pro-Thaksin and anti-Thaksin sides, said Titipol Phakdeewanich, a political science professor at Ubon Ratchathani University.
Ubolratana, who is active on Instagram with more than 100,000 followers, late Tuesday posted a message reflecting on the events.
The recommendation for the dissolution of Thai Raksa Chart, a newly-formed party closely aligned with ousted ex-premier Thaksin Shinawatra, came as a huge blow to the party, who, in a fight for their political life, wrote to the election commission on Wednesday morning, stating that the forced dissolution of the party would contravene Thai law.
It's hard to know just how much direct communication she has had with her brother about this since the fallout - but it's likely she will now have to retreat from political life, no matter how she feels about it.