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Gremio have been unsuccessful in their appeal against elimination from the Copa do Brasil over the racist behaviour of their fans.
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Gremio suffered a 2-0 loss in the round-of-16 first leg, before a Brazilian sports tribunal unanimously voted for Gremio's exclusion.
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While the verdict was partially overturned, a points deduction has effectively ended Gremio's involvement in the competition.
Santos will now meet Botafogo in the quarter-finals.
Gremio, who were also fined 54,000 Brazilian real, are four-time winners of the Copa do Brasil, but have not tasted glory since 2001.
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