Shawcross, 55, is currently serving a 250-year sentence for killing 11 prostitutes.
Convicted killer and cannibal Arthur Shawcross submitted 10 pictures to the annual Corrections on Canvas inmates show in New York.
But members of his victims' family were outraged by his inclusion in the exhibition.
Governor George Partake immediately took steps to get violent criminals barred from entering their work again.
Shawcross, 55, is currently serving a 250-year sentence for killing 11 prostitutes.
Liz Vigneri, whose daughter was murdered by Shawcross, said: "They do all this for him and they forget his victims."
Inmates are allowed to sell their paintings and keep half the profit for themselves.
Punished
Shawcross' pencil sketch of Princess Diana is for sale at $500 (£348) and pictures of winged horses and butterflies are more expensive.
The remainder of the proceeds from the sale goes to the Crime Victims Board.
In 1999, Shawcross was punished for giving away paintings and poems outside prison.
These were then sold on the internet auction site e-bay.
He was given two years' solitary confinement for profiting from his art, reduced to nine months on appeal.
A spokesman for the state prison commissioner said no decision has been made about withdrawing work from this year's exhibition.
The commissioner will have the responsibility in future years for deciding which inmates are banned from exhibiting their work.