For the 2004 Summer Olympics, Thanou was one of the main hopes of the home crowd for winning an athletics medal. However, on the day prior to the opening ceremony, Thanou and her training partner Konstantinos Kenteris failed to attend a drugs test, and later the same night were hospitalised, claiming they had both been injured in a motorcycle accident. In the ensuing doping scandal, Kenteris and Thanou announced their withdrawal from the Games on 18 August after a hearing before the Disciplinary Commission of the IOC, for what they described to be "in the interests of the country." An official Greek investigation into their alleged accident ruled that it had been staged and the pair were criminally charged with making false statements to authorities. The charges are still pending.
The missed test in Athens was the duo's third violation of the summer and they were consequently provisionally suspended by the IAAF on 22 December 2004. In June 2005, however, the athletes were cleared of all charges by the Greek athletics federation. Their coach Christos Tsekos was blamed for the missed tests and suspended for four years, but was cleared on separate allegations of distributing banned substances. After a long legal battle, on 26 June 2006 prior to a final ruling by the Court of Arbitration for Sport, the athletes reached an out of court settlement with the IAAF accepting anti-doping rule violations of 3 missed tests between 27 July and 12 August 2004 (in breach of Rule 32.2(d)) and a failure to provide a urine and a blood sample on 12 August 2004 (in breach of Rule 32.2(c)). In return, the more serious charges against them, those of evasion and refusal to provide a sample, were dropped. They have been eligible to compete since 22 December 2006.
Following the revelations about Marion Jones's use of steroids, Thanou, who finished 2nd behind Jones in the 100 m at Sydney 2000, was in line to be awarded the American's gold medal, but due to Thanou's own tainted record the IOC, after two years of deliberation, opted to punish Jones without rewarding Thanou. Jones' gold medal was withdrawn but was withheld by the IOC, Thanou remaining a silver medallist.
Thanou was provisionally selected by the Hellenic Olympic Committee to compete at the 2008 Summer Olympics in Beijing. However, as she had not achieved the Olympic 'A' standard (11.32 seconds), if another Greek woman had achieved this, she would have been forced off of the team.
However, all of this became moot on 9 August 2008, when the executive board of the IOC decided to bar Thanou from competing under rule 23.2.1 of the Olympic charter. This rule allows the banning of athletes who are thought to be guilty of improper conduct or bringing the games into disrepute. Thanou claimed that she faced "intense pressure" to withdraw from the Beijing Olympics, four years after being involved in a major doping controversy at the Athens Games. The decision may lead to a messy legal battle. Thanou, who qualified for the Beijing Games, had threatened to sue Jacques Rogge, the IOC president, if she was denied permission to participate.
Thanou was tried in 2009 for making false statements to police, to avoid a doping test, on the eve of the 2004 Athens Olympics. On May 9, 2011, Thanou and Kenteris were convicted of perjury and received suspended sentences of 31 months against which they immediately appealed. The judge declared that the "motor accident at the Olympic Games in reality had never taken place". On 6 September 2011, the Guardian newspaper reported that Costas Kenteris and Katerina Thanou had been acquitted by a Greek appeals court of faking a motorcycle crash after missing a drugs test.