We present multiband optical photometric and spectroscopic observations of an unusual Type II supernova, SN 2018hfm, which exploded in the nearby (d approximate to 34.67 Mpc) dwarf galaxy PGC 1297331 with a very low star formation rate (0.0270 M-circle dot yr(-1)) and a subsolar metallicity environment (similar to 0.5 Z(circle dot)). The V-band light curve of SN 2018hfm reaches a peak with value of -18.69 +/- 0.64 mag, followed by a fast decline (4.42 +/- 0.13 mag (100 d)(-1)). After about 50 d, it is found to experience a large flux drop (similar to 3.0mag in V), and then enters into an unusually faint tail, which indicates a relatively small amount of Ni-56 synthesized during the explosion. From the bolometric light curve, SN 2018hfm is estimated to have low ejecta mass (similar to 1.3M(circle dot)) and low explosion energy (similar to 10(50) erg) compared with typical SNe II. The photospheric spectra of SN 2018hfm are similar to those of other SNe II, with P Cygni profiles of the Balmer series and metal lines, while at late phases the spectra are characterized by box-like profiles of H alpha emission, suggesting significant interaction between the SN ejecta and circumstellar matter. These box-like emission features are found to show increasing asymmetry with time, with the red-side component becoming gradually weaker, indicating that dust is continuously formed in the ejecta. Based on the dust-estimation tool DAMOCLES, we find that the dust increases from similar to 10(-6) M-circle dot to 10(-4)-10(-3) M-circle dot between +66.7 d and +389.4 d after explosion.