The Entertainer, which has branches in Glasgow and Livingston, said the charms could contain phthalates, which can disrupt hormones in children.
The chemicals, which are used to soften plastics, have been banned in toys on sale in the European Union for several years.
The craze for loom bands - tiny loops of elastic in different colours that can be linked together to create low-cost jewellery such as necklaces and bracelets - shows no signs of abating, with the Duchess of Cambridge and pop star Harry Styles seen wearing them.
A spokeswoman for the retailer, which has 92 stores in the UK, said: "It was brought to our attention today that loom charms purchased from one of our stores may contain phthalates. At The Entertainer, children's safety is our number one priority so as a precautionary measure we have removed all loom charms from sale with immediate effect whilst we conduct a full investigation."
She added that any customers who had bought charms would be offered a full refund or exchange in any of the stores and emphasised that it was not the actual loom bands that were affected.