Nesta's doping sample was one of 454 that were reanalysed last year among various athletes. The results showed that Nesta's sample contained the banned stimulant methylhexaneamine.
The International Olympic Committee said in a statement: "The Jamaican team is disqualified... the corresponding medals, medallist pins and diplomas are withdrawn and shall be returned."
"The Jamaican team is disqualified," the IOC ruled
Usain, who is dubbed the world's fastest man, will have to return his medal, meaning he will also lose his 'triple triple' legacy.
Usain and Nesta both ran in the 4x100m relay in Beijing alongside Michael Frater and Asafa Powell. Nesta ran the first leg of the race. They completed the relay in 37.10 seconds, ahead of Trinidad and Tobago and Japan, who will now have their medals upgraded. Brazil will receive bronze.
Nesta was tested on the eve of the race in 2008 but the results found no "adverse analytical finding". However an anomaly was discovered during the testing of his B sample last year.
Methylhexanamine has been on the World Anti-Doping Agency prohibited list since 2004.