Lastminute.com breached decency rules by mentioning sex offender Gary Glitter in an advert for children's theatre tickets, the industry watchdog said.
Glitter was jailed in Vietnam
The Advertising Standards Authority (ASA) ruled the advert was likely to cause serious or widespread offence.
Showing two young boys, it stated: "Like Gary Glitter in a sweet shop, you too can have your pick of kiddy treats in London's theatre world".
The online firm apologised and said the advert had now been withdrawn.
A spokesman for the website said: "We aim to create advertising which makes us stand out. However, on this occasion we realise that there has been an error in our judgment."
Gary Glitter, real name Paul Gadd, was jailed in Vietnam earlier this month for molesting two young girls.
In 1999 he was handed a four-month jail sentence in the UK after being convicted of possessing indecent images of children. He left the country after his release.
One complainant claimed that linking children's leisure activities with a sex offender was offensive.
The ASA found the online travel and leisure firm's advert was in breach of the advertising code's decency clause.
The watchdog noted that the advert played on "contemporary, tasteless humour" based on Glitter's UK conviction.
"We considered the reference to a registered sex offender in conjunction with images of children in an ad for children's theatre was likely to cause serious or widespread offence," the ASA said.