The decision leaves Fallon as the only roster agency to make it through to the final stage of the review. It will now compete against DDB, WCRS and Rainey Kelly Campbell Roalfe/Y&R for a place on the roster.
The final stage will involve pitch workshops with the four agencies. The BBC expects to announce the final roster in October.
The director of BBC marketing, communications and audiences, Tim Davie, said: "For the past five years, our agencies have done a fantastic job in producing outstanding creative work. This review has made us look closely at our requirements as we move into a multimedia, on-demand world. We want to work with partners who can help us shape new ways of engaging with our audiences."
The news will not affect AMV's recent appointment to create the channel idents for BBC2 or its work on BBC World and TV Licensing.