"It's hugely disappointing for Cara," said Philip Rush, Swimming New Zealand's open water manager. "She swam so strongly for five laps. It is very tidal here and her group just buttoned off the pace on that last lap.
"The group behind used the tide well and took their chance to catch the chase pack. From there they just out-sprinted her although the tactics were rough in the final 150m.
"She is very upset. Her group had things well under control going into the last lap."
There are also a further five continental places available to complete the field for London, with Baker's 17th placing making her the leading finisher from the Oceania region.
"There are no other swimmers to get to the final qualifier from the Oceania region other than Cara and Charlotte Webby," Rush said.
"We will prepare a case to our selectors to take up with the NZOC because the spot won't be filled otherwise. Cara certainly swam well enough to prove she can foot it in the field for London."
The Queensland-based swimmer was fourth after the opening lap and remained in the tight group of nine swimmers who opened an eight second buffer on the chase pack.
Hungary's Eva Risztov and Americans Ashley Twichell and Haley Anderson opened a 10-metre lead with one lap remaining leaving Baker still well placed in seventh. However the pack then dropped their pace allowing the next group of nine to catch.
Anderson prevailed in 1:44.30 just ahead of Risztov but the chasing group stepped up the tempo to forced their way through small group with Baker among others the big losers.
Webby finished 29th, five minutes behind the winner.