Thursday evening are a nightmare come true

For an industry as paranoid about bad publicity as fashion, the events of Thursday evening are a nightmare come true.

With Paris Fashion Week looming, one of couture's most brilliant exponents finds himself suspended from Christian Dior and facing criminal charges after an allegedly drunken confrontation with a couple in the ritzy Marais district of the French capital.

A man used to making the headlines on the catwalk this time made them at a cafe where he was arrested on suspicion of assault and making anti-Semitic remarks.

Police said that Galliano, the French couture house's 50-year-old chief designer, had drunk the equivalent of up to two bottles of wine when he was held shortly after 9pm on Thursday night.

A police source said: "We managed to break up the disturbance. The man involved was briefly arrested and then released pending charges for assault.

"Witnesses said he swore heavily, using anti-Jewish insults, before attacking a couple. Both have provided witness statements, as have a number of people and staff at the bar."

A Paris police spokesman said that Galliano was facing criminal charges and would appear in court on a date to be fixed. Galliano denies the anti-Semitic remarks – a crime which, in France, is punishable by up to six months in prison.

The Marais has historic associations with Paris's Jewish community and was the scene of Nazi deportation round-ups. Its cobbled streets are now home to fashion houses, luxury boutiques and high-end restaurants. France's Europe 1 radio quoted the couple allegedly insulted as saying that Galliano made "derogatory comments about them with reference to Jews and Asians".

But Stephane Zerbib, Galliano's lawyer, said that the designer "formally denies the accusations of anti-Semitism made against him". Galliano was "not at all in this state of mind (and) will explain later," Zerbib said, adding that "legal action will be taken against those making such accusations".

The lawyer said: "There was an altercation, Mr Galliano was verbally attacked, but at no point did he make any such insults, and we have witness testimony that backs this up."

Dior, part of billionaire Bernard Arnault's LVMH luxury empire, took swift action to limit the damage.

Sidney Toledano, Dior's chief executive, said in a statement: "Dior affirms with the utmost conviction its policy of zero tolerance towards any anti-Semitic or racist words or behaviour. Pending the results of the inquiry, Christian Dior has suspended John Galliano from his responsibilities."

Friends of the Gibraltar-born Galliano, who was reported to have agreed to design Kate Moss's wedding dress, struggled to account for the turn of events. A Parisian colleague said: "Women love John because he has a very feminine side. Reports of this assault are so out of character. I've never seen him being violent towards anyone."

Police, who escorted Galliano to his home after the incident, suggested the outburst was prompted by "stress" over his next major Dior show, the Autumn/Winter 2011 Collection.

It is unclear whether Galliano, who produces six couture and ready-to-wear collections a year, will unveil his eponymous label's collection at an invitation-only event two days later.