One film shows a grim-faced man furiously describing the suspicion he faces as a bearded Muslim while in another, Isis sends a message to a boy playing a video game inviting him to "Stop playing. Come and fight with us - that is your REAL mission".
The campaign was paid for by the EU's Internal Security Fund: Police programme, which has a €1 billion budget to distribute money for projects to boost counter-terrorism in EU countries, except Britain and Denmark, which have opt-outs.
Sajjad Karim, the first European and British-born Muslim to be elected to the European Parliament, said he was shocked by the films.
The Tory MEP for the North West of England narrowly escaped with his life after being caught up in the 2010 Mumbai terror attacks, which killed nearly 200 people.
He said: "These films are a disgrace - a very dangerous disgrace on so many different levels. Prejudices are reinforced and I am horrified that public funds have been used in such a way.
"In the list of disastrous unintended consequences this must rank pretty highly," said Andrew Bridgen, the MP for north-west Leicestershire.
A spokesman for the European Commission said it was "in contact with the project consortium and has already raised its concerns".
The spokesman, who insisted the commission always monitored the use of EU funding carefully, said the videos were not part of an EU campaign but were part of a project that received money from the bloc's security fund.
"The videos are not the ownership of the commission nor is the commission responsible for their content," she added.