The US Jewish lobby, led by the American Jewish Committee, led the attack on the hamburger firm, which had originally hired the pop star Shaaban Abdel-Rahim to promote its McFalafel sandwich in a TV ad.
The singer, however, was until recently at the top of the Egyptian charts with a song called I Hate Israel.
The American Jewish Committee thanked McDonald's for moving to cancel its new campaign in Egypt.
In a statement, Shulamit Bahat, acting executive director of the AJC, said, "Your expeditious response to our concerns is much appreciated. Thank you for moving so quickly to cancel the new Egypt ad campaign featuring a hateful singer."