The ad, which can still be seen on the , features an old photo of reforms minister Umberto Bossi raising his middle finger during a speech.
The famously populist and at-times xenophobic Bossi, who is also the leader of the separatist party Northern League, is shown alongside the text: "The government supports Alitalia's high prices, supports Alitalia's frequent strikes and couldn't care less about Italian passengers."
The ad's text suggests the gesture is directed at Italian passengers, who, it alleges, must suffer high-ticket fares and strikes because the government continues to support failing state carrier Alitalia.
The Italian government is in the midst of putting together a rescue plan to save Alitalia from bankruptcy.
The ad has caused a storm of protest in Italy, where the government has demanded an apology and newspapers have reacted angrily.
Altero Matteoli, the transport minister, said: "This airline that operates at our airports and in our skies should apologise -- not just to Minister Bossi but to the Italians."
Ryanair is standing by its ad. Stephen McNamara, Ryanair's head of communications, said in a statement: "It is not often that we see government ministers displaying their views so graphically.
"We felt that the image was also a reflection of the complete disregard the Italian government shows taxpayers by continually bailing out Alitalia with never-ending government subsidies."
Earlier this year, the loss-making Alitalia received a €300m loan from the government to stave off bankruptcy.
Ryanair and other Alitalia rivals have said the loan is illegal, and EU regulators are probing whether it violates competition rules on state aid.
It is not the first time that Ryanair, which was referred to the Office of Fair Trading by the Advertising Standards Authority in April after repeatedly breaching UK advertising codes, has become embroiled in trouble for its advertising outside of the UK.
In May, French President Nicholas Sarkozy and his wife, Carla Bruni, won a lawsuit against the carrier, which was ordered to pay €60,000 for using a photo of the couple in an ad without permission.