The advert said: "Steven Barker: animal abuser, baby abuser, rapist. People who are violent towards animals rarely stop there."
The ASA ruled that the poster advert was likely to cause serious offence and distress, particularly because it was displayed on a poster in Haringey, where Baby P lived.
In its adjudication, the ASA said some people might find the reference exploitative and that it had been "used in a shocking way merely to attract attention".
It said that "advertisers who wished to refer to current or emotive news stories in their marketing should take particular care over how such stories were used, in order to avoid accusations of exploitation or shock tactics".
In a statement, a Peta spokesman said: "Cruelty to animals and children is inherently shocking, and in creating the advert we hoped to prevent other children and animals from suffering the kind of shocking abuse that Baby P and Mr Barker's animal victims suffered."