VoucherDigg.co.uk appears to have been taken down.
Mr Mitchell said Madeleine's parents were horrified when they found out.
"The misuse of Madeleine's picture in this way is utterly appalling and frankly unforgivable," Mr Mitchell told Sky News UK.
"Whether it's a mistake or hacking it's an utter disgrace."
"That is the last picture of Madeleine that was taken on the holiday in 2007 just before she was taken, and for someone to use it - as some sort of sick joke it would appear - advertising holidays to Portugal of all places, is just appalling.
"There is no excuse for it."
He said a London law firm had been contacted to help have the image removed.
Lawrence Hunt, chief operating officer at lowcostholidays.com, told Sky News UK the company has no contract with VoucherDigg to advertise their holidays, and said they are doing what they can to have the "vile" image removed.