Dyson was one of six players sharing second place at the halfway stage at Lake Malaren but was disqualified for signing for an incorrect score in the second round.
The 35-year-old, six time winner on the European Tour, failed to add a two-shot penalty to his card after an incident on the eighth hole, when he touched the line of his putt after marking his ball.
“Television viewers alerted the European Tour to the incident, which took place on the eighth green during the second round,” said European chief referee John Paramor.
“And, when the footage was reviewed, Simon was seen to touch the line of his second putt after marking and lifting his ball on the green.
“He subsequently failed to add a two-shot penalty to his score when signing his card and, as a result (was) disqualified.
“He was bitterly disappointed, he had no way of explaining why or how he came to do what he did; he had no recollection of it until I showed him and even then he said ‘I can’t even remember doing it.’ It’s a very sad thing.”
Dyson’s disqualification dealt a huge blow to his chances of making the Race to Dubai finale.
Only the top 60 on the European Tour money list are eligible for the final event, with Dyson currently ranked 66th. He will now need a good performance in either the WGC-HSBC Champions or Turkish Airlines Open to qualify for the DP World Tour Championship.
Dyson was the latest player to have a rules infraction spotted by television viewers, the most famous this year being Tiger Woods taking an incorrect drop during the second round of the Masters.
Woods escaped disqualification because officials said they had examined his drop on the 15th hole and ruled he had done nothing wrong, but did not speak to Woods before he signed his card.
Gonzalo Fernandez-Castano survived a nervous finish to claim his seventh European Tour title at Lake Malaren, victory taking him top of the Ryder Cup standings.
Three shots clear of the field with one hole to play, the Spaniard ran up a double-bogey six on the 18th to take some of the gloss off a brilliant performance.
He began the day one shot behind joint leaders Luke Guthrie and Rafael Cabrera-Bello but carded a closing 68 to finish 11 under, one shot ahead of Francesco Molinari and Thongchai Jaidee.