The advert for Olay Definity eye illuminator pictured the 60-year old model crediting the product as her ‘secret to brighter-looking eyes’.
But more than 700 people complained to the ASA that the advert had been airbrushed too heavily.
The complaints came on the back of MP Jo Swinson's Real Women online campaign, which she launched in August. The campaign called for airbrushed ads to be clearly labelled, and for airbrushing to be banned in adverts aimed at children.
The campaign encouraged more people to complain, and gave people a place to air their views more easily.
Swinson said: 'I hope this decision marks the first step in really getting airbrushing in advertising under control. If advertisers think that someone as beautiful as Twiggy needs to be so heavily airbrushed, then what hope is there for the rest of us?'
She added: 'Experts have already proved that airbrushing contributes to a host of problems in women and young girls such as depression and eating disorders. Liberal Democrats believe in the freedom of companies to advertise but we also believe in the freedom of women to be as comfortable as possible with their bodies. They shouldn’t constantly feel the need to measure up to a very narrow range of digitally manipulated pictures.'