Restaurant Riche, in the capital city Stockholm, displayed the artwork, titled “Bat Man”, from 9 September.
It shows the Chinese president with bat ears and red lips in front of a Japanese-style rising sun, in an apparent reference to the theory coronavirus originated in bats in China.
The artwork was criticised online by Philipino fashion influencer Bryanboy, who wrote on Instagram: "The racism was so distressing."
He said: “It wasn’t until we placed our order that we noticed all the huge posters on the wall — an illustrated portrait of a very yellow Xi Jinping with bat ears and the term 'BAT MAN’.”
Restaurant Riche removed the artwork, admitting many had found it"disturbing and racist, which was of course not the intention" and said it “sincerely apologise[s] to anyone that was offended”.
The artist behind the poster, who publishes under the name Iron Art Works, also apologised on Instagram, writing: “My intention was only to make a fool of Xi/CCP [Chinese Communist Party] not to make a racist comment that hurt a lot of people.”
They said their previous art also satirised several world leaders, adding: "I can't stretch (sic) enough how much I apologise for the people who got their feelings hurt by it".
In his Instagram post, Bryanboy had written: "Ever since Covid happened, many Asians around the world have gone through so much racist abuse - for instance, on social platforms, I don’t know of any Asian person who wasn’t called a “bat eater”.
"Now imagine being the only Asian (I’m Filipino, my friend is HK Chinese) customers inside the restaurant, it was packed and everyone was white (they had 2 Asian staff - but they’re Swedish) and then every single wall in there had posters of ‘Bat Man’.
“It was just so awkward and quite frankly, I was so embarrassed and mortified I took my Chinese friend there... we ate in silence and we left as soon as we were done. The racism was so distressing!”
Coronavirus cases were first reported in the Chinese city of Wuhan, in Hubei province, in December.
The World Health Organisation has cautioned against labelling the virus the “Wuhan virus,” “Chinese virus” or “Asian virus”, saying the “official name for the disease was deliberately chosen to avoid stigmatisation”.