The musician failed to pick up a nomination in the album of the year or song of the year categories despite releasing one of the best-selling records of the year in Divide.
His smash-hit third album was nominated in the best pop vocal album, however, while number one hit Shape Of You is up for best pop solo performance.
Fellow Britons Coldplay will battle it out with Sheeran in the pop vocal album category, while they are also nominated for best pop duo/group performance for their collaboration with The Chainsmokers on Something Just Like This.
Leading the way in the nominees is rapper Jay-Z, who is up for album, song, and record of the year, while Kendrick Lamar is shortlisted for seven prizes.
Bruno Mars is also nominated for the big three, where he is joined by Childish Gambino’s Awaken My Love! Lorde’s Melodrama and Lamar’s DAMN.
Record of the year sees Jay-Z and Mars face off with Lamar and Gambino again alongside the year’s biggest hit – Despacito by Luis Fonsi, Daddy Yankee and Justin Bieber.
Other British nominees include Bonobo for latest record Migration and Guernsey-based DJ Mura Masa in the best electronic/dance category, while singer-songwriter Laura Marling is up for best folk album.
There are also posthumous nominations for Leonard Cohen and Chris Cornell in the best rock category, while actress Carrie Fisher, who died last December, is shortlisted for the best spoken word album for her memoirs, The Princess Diarist.
The 60th Grammys will take place on Monday January 29 in New York City.