The image was unveiled on Ardoyne Avenue as part of a commemoration of Martin Meehan.
Councillor John Blair said: “I am disappointed to see a banner like this erected in the Ardoyne area. This move is not representative of the local community, which does not want to see the image of a paramilitary gunman displayed on their doorsteps.
“Alliance is against any murals or banners that demarcate territory and glorify violence of any kind. They have no place in a safe and shared community. We must find ways to separate the negative aspects of the past from respectful commemoration.
“It is difficult to see how the depiction of gunmen can inspire people to play a constructive role in the community and it memorialises the darkest parts of our past rather than the change people have made or the more positive aspects of our heritage.
“I would urge those behind this banner to remove it immediately.”