Loose dress: hem is dropped in church (7)
I believe the answer is:
chemise
'loose dress' is the definition.
(I've seen this before)
'hem is dropped in church' is the wordplay.
'dropped in' means one lot of letters goes inside another.
'church' becomes 'ce' (Church of England).
'hem'+'is'='hemis'
'hemis' inserted within 'ce' is 'CHEMISE'.
(Other definitions for chemise that I've seen before include "Loose-fitting dress without a waist" , "Smock" , "Woman's sleeveless undergarment" , "Loose dress" , "Loose-fitting dress or undergarment" .)