The seasonal spot, created by Partisan, followed a young girl being wrenched from her monster family to live with a 'normal' family, only to escape back to the welcoming claws of her original guardians after being unable to adjust to normalcy.
The four-minute creative was launched online last week with the intention of mounting a major TV campaign, commencing with a 30-second edit during a screening of Harry Potter and the Deathly Hallows backed by social media.
That launch was ultimately spiked following a strong reaction from adoption charities.
Speaking on behalf of the UK Adoptive Parent Support Group, John Cutler told Campaign that the ad would "retraumatise society’s most vulnerable people" if it had been allowed to run on TV and in cinemas.
Responding to the criticism Abi Pearl Ward, Giffgaff's head of advertising, said: "We would like to say sorry. We made a mistake with our new Halloween campaign. It was never our intention to cause any offence to the adoption community, or anybody.
"However, we understand that, whether we meant to or not, we have. As a company that has a community at its heart, we believe in listening to people, so have taken the decision to stop running this ad."
Giffgaff is well-known for running high-profile Halloween films, putting the frighteners up late-night revellers last year with its own spooky nightclub.