The agency had been brought in to handle a high profile re-launch of the station in the next few weeks.
'I took the decision to walk away from this opportunity because of a disagreement over strategic and creative direction', said Mischief MD Mitchell Kaye.
'It would have been much easier to stay and bank the money, but we don't put our name to work that we don’t believe in', he said.
Virgin Radio head of comms Cat Macdonald said: 'Mischief came with great credentials and reputation. It's a shame it hasn't worked out.'
Macdonald will not put the account out to pitch again. Instead the four-strong in-house press team will handle PR and lead the ongoing strategic communications of the music and entertainment brand.
The re-launch follows last month's £53m sale to TIML, a subsidiary of The Times of India. The Virgin Radio brand will disappear at the end of September.