Posters went up across Nottingham this week warning residents not to donate to those sleeping rough.
Two bus-stop ads as part of the campaign read: "Begging: Watch your money go to a fraud" and "Begging: Watch your money go up in smoke".
But the messages sparked fury from locals, who called for their removal and said Nottingham City Council bosses should be "ashamed" for authorising the ads.
The adverts are part of Nottingham's '#givesmart' campaign, which launched last week and encourages people to donate money to homeless charities rather than individuals.
A release on the council's website says it was started "because of concerns that money given directly to people who beg is used to feed harmful addictions".
But the tone of the adverts have sparked anger, with some saying they stigmatised vulnerable people, while others called the message "utterly reprehensible".
It comes after a similar campaign from council bosses in London was criticised.
The Royal Borough of Kensington and Chelsea advised members of the public not to donate to beggers in August last year because they were “likely to spend the money on drugs and alcohol”.
Jeremy Swain, chief executive of London charity Thames Reach, also urged Londoners to stop handing out cash to beggars saying the funds often went towards alcohol and drugs.
Nottingham City Council is yet to respond to a Huffington Post UK request for comment.