The Israeli advertising watchdog has ordered all advertisements and promotional materials for Dimebags to be removed from the market.
The decision comes amid growing tensions in Israel following the murder of three Jewish teenagers in the West Bank last month, and the recent attack in Tel Aviv, Israel, by a Palestinian attacker who was killed by police.
Dimebags has been selling its products in the United States for years, but its advertising campaign in Israel was criticized for depicting the Israelis as terrorists and anti-Semites.
Its ad campaign depicted a smiling Israeli youth wearing a black mask as he stood outside the gates of the occupied West Bank city of Hebron with a bag of explosives.
The video sparked outrage in Israel, where some people have branded the video a glorification of terrorism and urged the Israeli government to remove it.
Dimebag is owned by Israel’s cosmetics conglomerate, Aspen Cosmetics.
Its main Israeli brand is Dior, which has also been in the news for its controversial ads featuring Israeli President Reuven Rivlin.