The Islamic apologist website Mypeace.com.au launched the controversial advertising campaign to provoke discussion and promote free literature.
Auxiliary Bishop of the Archdiocese of Sydney, Bishop Julian Porteous described the campaign as a direct assault on Christianity and called for the billboards to be immediately removed.
"In Australia with its Christian heritage a billboard carrying the statement 'Jesus A prophet of Islam' is provocative and offensive to Christians," he said.
"Central to Christianity is the belief that Jesus Christ is more than a prophet. He is the Son of God. He is acclaimed Lord and Saviour of humanity.
"This statement is a direct assault on Christian beliefs," said Bishop Porteous.
The Bishop has also lamented that the incendiary campaign has the potential to damage relations between the Christian church and the Muslim community.
"It is important that religions do not set out to antagonise those with differing beliefs. This would threaten the social harmony which we enjoy in Australia.
"Dialogue between the religions can only take place when it is founded in mutual respect. It is not fostered by provocative statements," he said.
"For the sake of preserving social harmony and respect between major world religions these billboards should be withdrawn, along with others which carry messages directly offensive to Christians.
Despite one of the billboards being vandalised within 24hrs of its launch, Mypeace.com.au has announced the campaign will now be extended beyond the original 4 weeks.
You can view the billboard designs on www.mypeace.com.au