The commercial was deemed to glamourise street car racing, reports The Telegraph.
It showed a car darting through traffic during a chase scene in a busy city.
The ASA concluded that the ad broke laws on health and safety, as well as driving standards – and ordered for it to be taken off air.
"We concluded that the ad glamorised street car racing and could be seen to condone dangerous driving," said the ASA.
The body also decided that text used in the advert reinforced the idea that the events were set in a real setting and could be copied.
The text changed from, "Dramatisation. Professional stunt. Do not attempt” to "Professional drivers. Closed course” before ending as “Jump in. Xbox 360.”
The commercial only went out after the 9pm watershed to protect younger viewers.
Microsoft’s advertising agency Mcann Erickson said that the vehicles in the advert didn’t break speed limits and protested that the on-screen text explained that all stunts were performed by experts.
It stated that Xbox is "committed to responsible console gaming and would not intentionally show irresponsible behaviour in an advert”.