The move delivers a big blow to ATA, which makes parts for Dyson's vacuum cleaners and air purifiers, as well as Malaysia.
The country is a key electronics manufacturing hub but it's facing increased scrutiny over its treatment of migrant workers, who make up a large share of its factory workforce.
Shares in ATA, which owes nearly 80% of its revenue to Dyson, tumbled to their lowest in over a year on the news Dyson was cutting ties.
Dyson, headquartered in Singapore, said it received the results of an audit of ATA's working conditions in early October launched following allegations made by a factory whistleblower.
ATA did not have immediate comment.
It's previously denied such allegations and is already being investigated by the United States after an American activist flagged complaints raised by several factory workers.
The U.S. Customs and Border Protection agency has not commented on the investigation.
In the last two years it's already banned six Malaysian firms from selling their products to the U.S. due to forced labor practices.
In July, the U.S. flagged Malaysia along with nations like China and North Korea for trafficking of migrant workers.
