EMI Music, the biggest record publisher in the world, has terminated its contract with streaming site Grooveshark.
It comes three months after EMI announced it was suing the service for not paying royalties.
The other three major record labels - Sony, Universal and Warner - are also taking the US-based site to court.
EMI's withdrawal means Grooveshark currently has no major record labels on board with the service.
The site, which is owned by Escape Media Group, was accused by EMI in January of not paying "a single royalty payment" or providing "a single accounting statement".
Grooveshark disputed this, saying it had to date paid EMI $2.6m (£1.6m), but added that streaming rates were "unsustainable".
The contract termination is likely to mean Grooveshark will be forced to remove songs belonging to EMI and its subsidiaries from the site.
However, at the time of writing, music from the label's immense catalogue - which includes the likes of George Michael and Tinie Tempah - was still available.
In a written statement, the Spotify rival said: "Grooveshark was recently forced to make the difficult decision to part ways with EMI due to EMI's currently unsustainable streaming rates and EMI's pending merger with Universal Music Group, which we consider monopolistic and in violation of anti-trust laws.
"Grooveshark's dedication to artists and rights holders remains the same."
In response, EMI - which is owned by US bank Citigroup - said it was "bemused" by Grooveshark's comments.
"The only decision that Grooveshark has made is to stop paying our artists for the music that is carried on their service," a spokeswoman told the BBC.
Unlike rival services like Spotify or Pandora - which license music from labels before adding them to the service - Grooveshark allows users to upload and share their own files.
This has provoked three of the four major global record labels - Universal Music Group, Sony Music Entertainment and Warner Music Group - to sue the website for copyright infringement.
However, Grooveshark has maintained that it works within the boundaries of the Digital Millennium Copyright Act, and that its terms clearly state that music uploaded by users must not be "illegal, obscene, threatening, defamatory, invasive of privacy, infringing of intellectual property rights, or otherwise injurious to third parties or objectionable".
With EMI Music, Grooveshark signed a licensing deal in which royalties would be paid by the site when music belonging to EMI and its subsidiaries was streamed.