The move comes after 23-year-old US artist Ben Mills posted naked photographs of Geldof online and claimed that he had a heroin-fuelled sex session with the model, which she denies.
Ultimo founder Michelle Mone said: "As a brand that targets young women, we feel it is impossible for Peaches to continue."
A source told The Sun: "She was incredibly proud of being Miss Ultimo. She got a kick out of being a model. She's furious at being sacked."
After a company meeting yesterday, Geldof was reportedly be dropped "with immediate effect" in a move that will reportedly cost Ultimo thousands of pounds as a planned photoshoot is shelved.