I played the Renegade’s Retreat nightmare dungeon.
I obtained the “Dungeon key” as a quest item and then I left the dungeon using the “Leave dungeon” wheel.
The dungeon key dropped when I teleported out to the dungeon entrance.
When I re-enter the dungeon entrance to continue the dungeon quest, the quest requested me to use the key to unlock the door but I cannot remember where the key dropped.
The map has no indication of where the key dropped.