Creature won the business in January after a competitive pitch, beating BMB in the final shootout. Cheetham Bell was the incumbent.
Dreams briefed Creature to create an integrated campaign that was set to launch later this year, but the retailer has dropped the agency before releasing any work.
Asked if Dreams was looking for a replacement agency, a spokeswoman said the retailer was "reviewing its position".
Dan Shute, the managing partner and a co-founder of Creature of London, told Campaign: "Sadly, what seemed so promising in January hasn't quite worked out how we all hoped it would – we still have an enormous amount of respect for the Dreams team, and wish them all the best going forwards."
Dreams' pre-tax profit for 2015 was £13.1 million, up from £400,000 in 2014, following a successful turnaround of the business under chief executive Mike Logue.
Lisa Bond, Dreams' marketing and ecommerce director, said in a statement: "Given the challenges and fast pace of retail, unfortunately the agency wasn't the fit for Dreams that we had hoped. We wish the Creature team all the best for the future."