Garvey, who skippered the club's under-20s side last year, is accused of punching Christopher Allan "multiple times" on the dance floor at the Hotel Illawarra on Thursday evening.
The 20-year-old Garvey informed the club on Friday of his involvement in an incident at the Hotel Illawarra and the Dragons stood him down for breaching their code of conduct.
Allan was left with a cut over his left eye and told the Illawarra Mercury he was waiting to find out if he'd sustained a fractured eye socket.
The incident is subject to a police investigation and no formal charges have been laid at this stage.
Allan and his friend James Stimson said they'd been on the dance floor about half an hour when a man acting aggressively approached them.
The report said the assailant, who Allan and another witness identified as 20-year-old Garvey, allegedly first pressed his head against Allan's before punching him multiple times in the face.
"I don't put my hands on someone else for no reason and I expect the same thing from other people," Allan said.
"I was having a good night up until that point and I've been dealing with it ever since, not to mention the pain I'm in. It doesn't tickle."
The club have informed the NRL's integrity unit of the situation, which is a distraction they could do without with their season starting on Sunday week against Wests Tigers.
Steve Price's side have had a troubled build-up to the new season and were hammered 38-20 by South Sydney in last week's Charity Shield.
A casualty from that match was star playmaker Josh Dugan, who has been ruled out for five weeks with a knee injury.
An NRL spokesman said the integrity unit would wait to find out more information from the club about the incident and see if police take any action.
The news comes just four days after NRL chief Dave Smith announced record profits of almost $50 million and claimed the game was placed to become the most played sport in the country.
Smith has made no secret of his desire to come down hard on players who break the law, insisting he wants to make the game more family friendly.
Last year he stood down NSW prop James Tamou for State of Origin game two and fined the Test star $20,000 after he was caught driving four times over the legal limit and without a licence.