She has been replaced on the ticket by the current MLA, Phil Flanagan, who missed out on selection at a previous selection convention six weeks ago.
In December, Ms Gildernew was selected to run alongside sitting MLA Sean Lynch and local councillor John Feely.
However, Sinn Fein's ruling council (Ard Comhairle) ordered a revote.
The party did not specify why, but it has been reported that concerns had been raised about procedural errors.
On Sunday, the new convention, which took place in Enniskillen, replaced Ms Gildernew with Mr Flanagan, who will now stand alongside Mr Lynch and Mr Feely.
In December, the outgoing MLA Bronwyn McGahan announced she would not be seeking re-election. However, Ms McGahan did put her name forward for the latest convention but was not successful.
Sinn Féin has come in for some criticism on social media for picking an all-male list of candidates.
There have also been rumours that Ms Gildernew, a former Stormont agriculture minister, might move to the neighbouring Mid Ulster constituency.
Last month, Deputy First Minister Martin McGuinness announced that he is leaving Mid Ulster in order to seek election in his home constituency of Foyle.
In response to the speculation about her moving, Ms Gildernew tweeted that "Mid Ulster has excellent candidates to replace @M_McGuinness_SF and my heart's in #FST".
She also said that she did not think she would stand as an independent and her de-selection "could be a blessing in disguise!"
During his time in the Northern Ireland Assembly, Mr Flanagan has been frequently in the news.
Last month, he was ordered to pay damages to the Ulster Unionist MP Tom Elliott over a defamatory message on Twitter.
Mr Flanagan has also been admonished by the Speaker, Mitchel McLaughlin over some of his comments in the assembly chamber and for not wearing a tie - a breach of the Stormont dress code.
The former MP Michelle Gildernew has been dropped as a Sinn Féin candidate for the Fermanagh and South Tyrone constituency in the Stormont elections.