The account, thought to be worth well in excess of seven figures annually, has been suspended during the three-month period of emergency rule declared last month.
Bell Pottinger has come under fire from a small group of protesters for its work in Bahrain, which has seen violent uprisings in recent weeks.
Lord Bell, chairman of Chime Communications, confirmed the suspension of the account, but stressed this did not necessarily point to a permanent disengagement.
'We had different contracts with the Bahrain government - most of them have been suspended,' he said. 'Clearly it is not possible to attract inward investment at this time.'
He added that the situation would be revisited as and when the period of emergency rule ended and that the agency continued to work for a number of clients in Bahrain.
Meanwhile, Good Relations, part of the Bell Pottinger group, has won the UK and European consumer tech and b2b PR account for Research in Motion. The makers of BlackBerry previously used Hotwire.