The Advertising Standards Authority received 67 complaints about the ad, which features the face of an overweight youngster about to bite into a burger above the words "Feeding kids meat is child abuse".
Complainants said it trivialised child abuse and was offensive to parents who feed their children meat.
The National Farmers' Union, the Guild of Welsh Lamb and Beef Suppliers and the International Meat Trade Association claimed that the ad was irresponsible.
Peta argued that "there is no way to educate the public about the far-reaching health implications of a meat-based diet without causing fear or distress to some degree".
The ASA admitted the ad expressed "an extreme point of view" but ruled that it was unlikely to cause serious or widespread offence.
Anita Singh, campaign co-ordinator at Peta, said: "The truth about harmful eating habits may be hard to swallow, but people have a right to hear it."
A spokesman for the NFU described the ASA's decision as "wrong and perverse".
He said: "The implication of this is that any extremist organisation can say what it likes because the fact it is extremist means its material won't be taken seriously."