The company, which has worked with Geldof since May last year, says it will remove images of the 21-year-old model from its website and shops immediately.
In a statement, a spokeswoman for Miss Ultimo lingerie says the brand has “no option but to terminate her contract.”
“Miss Ultimo is a brand geared towards a young female audience and as a company we have a social responsibility to ensure we are promoting only positive role models that young women can aspire to.
“We are thus in the process of removing Peaches from the website and we are working with Debenhams to remove her visuals from all Miss Ultimo shops and window displays throughout the UK.”
Michelle Mone, the founder of the brand, says: “We’ve given this a lot of thought, but there’s a point where a business must stick to its principles and as a brand that targets young women, we feel it is impossible for Peaches to continue to work with us as the face of Miss Ultimo lingerie.”
Geldof was the first celebrity ambassador for the Miss Ultimo range, a spin off of the Ultimo brand which launched last year targeting 18-25 year-old women.
The brand plans to appoint a new celebrity brand ambassador to replace Geldof.
Separately the company has revealed TV presented Kelly Brook will front the Ultimo brand and star in forthcoming advertising campaigns.
The brand has previously worked with Mel B, Helena Christensen and Sarah Harding.