Social services vice-chairman Les Levitt and highways chairman Malcolm Hall were backed by their ward branches after failing the test. Both branches have been suspended pending an investigation by the party.
Mr Levitt intends to request a judicial review of the decision to prevent him standing unless he is allowed to resit the test under independent supervision.
He claimed the party was using the test to replace male candidates with women. 'There's nowt wrong with putting a woman on the panel, but she's got to get there on her own merits,' he said.
Mr Hall said: 'We don't know anything about the criteria these people are using.' He welcomed the party's investigation, saying: 'This is what we've been waiting for.'
The Project 99 test combines interviews and a written exam, and all potential candidates have to pass to be allowed to stand.
A regional Labour Party spokesman said: 'It would be a crazy world if Les Levitt and Malcolm Hall were exempt when everyone else has gone through a proper selection. They were simply not good enough.'
Mr Levitt and Mr Hall have both been councillors for 16 years, but length of service is not taken into account.
'Being a Labour councillor is not a job for life,' the party spokesman said.