The decision will mean an end to work on the brand produced by cdp-travissully.
As Collett Dickenson Pearce, the agency's surreal B&H work, stretching back more than three decades, changed the face of UK creativity and revolutionised posters.
Industry sources claim Gallaher has earmarked about £3 million for a 48-sheet poster campaign in support of the brand, which will break this Saturday on 4,500 sites across the UK.
Its aim is to fix the B&H brand firmly in smokers' minds before the Tobacco Advertising and Promotion Bill becomes law.
Moray MacLennan, M&C Saatchi's joint chief executive, said: "Benson & Hedges is a brand that helped to revolutionise advertising in this country during the 70s. We're more than pleased to have won the account."
However, cdp-travissully's chairman, Peter Travis, said the assignment was a one-off project. "Benson & Hedges' creative account remains with us, he said.
Cdp-travissully continues to handle Gallaher's Hamlet cigars and the Mayfair budget cigarette brand.