Work on the first building on the Vaux site has "ceased with immediate effect" after construction giant Carillion went into liquidation.
Sunderland City Council and the construction company formed the Siglion partnership in 2014 to press forward with regeneration plans across the city, including the former brewery site in the city centre.
A statement released by the council this afternoon said: "The council has been notified by Carillion’s liquidator that building work on Vaux Phase One has ceased with immediate effect.
"The council is in discussions with Carillion and liquidators PricewaterhouseCoopers regarding next steps and to ensure that work is resumed and the Phase One building is delivered as soon as possible."
It follows a series of set backs for the site following the closure of the brewery in 1999.
The Echo understands Carillion, which is employed by Siglion and not the council, has already made its equity investment in full into Siglion.
Carillion Construction Ltd has been carrying out construction work on the Vaux Phase One Building as Siglion’s contractor.
These works were due to complete in the coming months.
The council has said at this stage, Carillion Construction is not carrying out any other works for Siglion.
The authority has retained the necessary legal protections and has various options available to it.
A spokesman added: "As with all of its major partnerships and contracts, the council pro-actively engages with its partners and contractors regarding performance and commitment on an on-going basis."