The panel made the recommendation Thursday after a daylong hearing at the Naval Air Station in Jacksonville.
The recommendation now goes to the Naval Personnel Command. A final decision will be made by the Secretary of the Navy.
The panel recommended downgrading Nowak from captain to commander and giving her a discharge of "other than honorable."
Nowak was sentenced to a year on probation last November after pleading guilty to third-degree felony burglary and misdemeanor battery.
Nowak confronted her romantic rival in the parking lot of Orlando International Airport in February 2007 after driving from Houston.