VCCP has held the business since 2004 and, despite being dropped, will remain a consultant for the vacuum cleaner and washing machine manufacturer.
Dyson has a creative team of 100 people, which have developed below-the-line communications since 1993.
The in-house team will now develop advertising campaigns in addition to their current duties. Dyson will also work with a handful of directors on television campaigns.
The company will be recruiting more people to its in-house creative and marketing teams over the next few months.
The decision will not affect Leagas Delaney, which was appointed last month to handle Dyson's pan-European advertising.
Adam Roston, UK marketing director at Dyson, said: "Our life is developing new technology and solving problems. And the job of our advertising is to simply communicate that technology and why it's different.
"Our talented Malmesbury team already does this across retail, online and packaging; they're now ready to take on advertising."