Richard Holden (pictured), who joined the agency in September as an associate director, has been accused of assaulting a woman aged in her 20s at a party in London in December 2016, according to Buzzfeed.
Police are investigating the incident. Holden was interviewed by officers under caution in February after he voluntarily attended a police station.
Holden denied the accusation, telling Buzzfeed: "I totally refute the allegation of a section three assault that has been made against me. It is completely and utterly untrue. I am confident that once the facts of the matter have been heard it shall be seen for what it is. I look forward to clearing my name in court."
A spokesperson for Newington confirmed that Holden had been let go, saying: "We were made aware yesterday (7 November) for the first time of a criminal allegation being investigated against him.
"Whilst we have not formed any view about the veracity or otherwise of the allegation, Richard had his contract with Newington Communications terminated with immediate effect due to his failure to disclose the fact that he was under police investigation at the outset of his employment with the agency.
"Newington at all times holds the highest ethical standards, and our contractual terms with all of our staff reflect this."
Holden worked at Conservative HQ from 2007 and became deputy head of press for the party before standing, unsuccessfully, for Parliament in Preston at the 2015 General Election.
After the election, Holden took up the role of special adviser to the former Leader of the House of Lords, Baroness Stowell, and then to Fallon last year.
Fallon resigned as Defence Secretary last week following allegations relating to his conduct towards women. He apologised for an incident more than 15 years ago when he repeatedly placed his hands on the knee of journalist Julia Hartley-Brewer.
Fallon said his behaviour towards women in the past had "fallen short".