The leaflet, which was designed to look like a folded handwritten note, recommended Lloyds TSB's home insurance products, bearing the words "chosen by your neighbors".
The advertising standards authority (ASA) agreed that the leaflet was misleading because it was not clear that it was an advertisement, looking as if it was a genuine recommendation by a neighbor.
A spokesperson for Lloyds commented: "All material displayed prominently the Lloyds TSB Insurance logo to identify it as marketing literature.
"We understand that that the ASA received only one complaint in connection with this material but we have taken the decision to withdraw this promotion."
The leaflet came in a plain envelope with a printed name and address scribbled out and the recipients written in what appeared to be handwriting.