Dyfed-Powys Police said extensive inquiries into the alleged incident, which was claimed to have taken place near John Street in the early hours of Saturday, November 13, had led them to conclude the crime had not occurred and was "totally unfounded".
Llanelli detective inspector Gary Phillips said: "We take all claims of sexual assault very seriously and will fully investigate such reports.
"Unfortunately, these allegations were totally unfounded and resulted in a great deal of unnecessary work for our officers. We are now dealing with the issue of falsely reporting a crime."
Mr Phillips went on to say that officers gave every victim their full support and he hoped this incident would not deter genuine victims of sexual assaults from coming forward and reporting crimes.
Llanelli AM Helen Mary Jones backed those sentiments, saying: "Any false accusation is always terrible and wrong, but there is nothing at all to suggest that false accusations of rape and sexual assault are common.
"In fact, we know that many women are put off reporting such crimes for all kinds of reasons. It's really important that anyone who is a victim of an offence like this is encouraged to come forward."