The campaign in the eastern Ukraine town of Donetsk came after utility rates in Ukraine increased markedly last year and people stopped paying their bills.
Irina Taran, a spokeswoman for Donetsk governing council, said dozens of billboards featuring Stalin appeared in the city last week; commercials featuring old film clips of the Soviet leader also appeared.
Ukrainian media reported that the mayor's office initiated the ad campaign, then backed down in the face of protests.
One billboard shows Stalin holding a piece of paper and saying "Comrades! This isn't a film! This is life!"
In the television ad, Stalin is shown in grainy black-and-white footage being applauded by hundreds of party members as a dubbed-over voice says: "Those who don't pay for their heat should be punished!"
Critics said it was shameful for authorities to be using an image of a man whom many Ukrainians blame for killing one-third of the country's population during the famine in the 1930s.
"We were surprised by these billboards ourselves. We have nothing to do with it," Taran told The Associated Press.
Donetsk mayoral officials could not be reached for comment, but one utility official told Russia's NTV television that the company was struggling with a serious backlog of unpaid bills.
"Stalin is used here not as a historical personality, but more as a symbol of inevitable punishment. Failure to pay for one's (utility) services is a serious wrongdoing," said Alexander Semchenko, deputy chief of the Donetsk City Heating Network Company.
Source: Business Week