This is the first big "end of level baddie" and is encountered at the end of level 4 [thanks BryanRPh!], but the technique isn't too hard as long as you keep your eyes open and know the basic combat commands. There are three stages:
1 - Keep hammering the Dweller until you stagger it. At this point, it will slam its tentacles into the red pools on the ground in front of you. Focus on one tentacle and use all the special attacks to do as much damage as possible. When you do, you'll get a special triggered attack where Star Lord will freeze the tentacle and Gamora will slice it off. This needs to be repeated for the other tentacle that's placed into a similar position.
2 - Very similar, but also having to deal with spiky jelly monsters. Freeze these to kill them more quickly, and again focus on the tentacles one at a time. This time they're being dipped into holes up and to the sides of the level, but the procedure is otherwise similar. Wait till they're stuck in the wall, hammer them with damage and trigger the Star Lord / Gamora combo.
3 - Not quite 'armless (ho ho), the Dweller will start firing more projectiles from its head. Some of these are spiky jellies, but others land and will be marked with a radius and a "Y". Hit that Y button quickly and Drax will fling them back at the Dweller. Repeat until the Dweller is defeated.