Jorge Zermeno, Mexico's ambassador to Spain, where the ad first aired, wrote a formal complaint to Burger King and asked for the campaign to be discontinued.
The ad, which has also aired in the UK, shows a short, squat Mexican wrestler in a poncho resembling the Mexican flag living with an American cowboy twice his height.
It was created by Crispin Porter & Bogusky to promote Burger King's Texican whopper with the strapline "the taste of Texas with a little spicy Mexican".
Zermeno said: "We have to tell these people that in Mexico we have a great deal of respect for our flag."
Mexico has very strict rules about the use of its flag. In 2008 the government fined publisher Random House Mondadori for showing disrespect to the country's flag in a video posted online.
In it a literature fan wearing the flag as a cape barges into a book signing by South American writer Paulo Coelho.
Burger King said that the ads were meant to show a mixture of influences from the south western United States and Mexico and not to make fun of Mexicans.
However it agreed to replace the ads "as soon as commercially possible".
The company said in a statement: "Burger King Corporation has made the decision to revise the Texican Whopper advertising creative out of respect for the Mexican culture and its people."
It is not the first time Mexican wrestlers have been used for comedic effect. In 2006 American actor Jack Black played a Mexican wrestler in the comedy film 'Nacho Libre'.
Black played a character who was raised in an orphanage in Mexico and fuelled by his passion for "lucha libre" wrestling he dons a mask and cape and competes in the local tournament.