The 15 pounds jihadi tribute outfit made in China includes shirt, vest, pants and headpiece - with the boy on the front cover of the packaging wearing a fake beard.
The costume is being sold at a pop-up shop called Halloween, in the Diamond Shopping Centre in Coleraine, Northern Ireland.
"It seems that just dressing up like a Muslim and having a beard means you look like a terrorist, which sends out the message that all Muslims are terrorists," an angry parent was quoted as saying by DailyExpress.
"It just seemed the costume consisted of normal Islamic-style clothing. I'm not sure exactly what made it a terrorist outfit except for the army-coloured waistcoat."
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"So it seems that just dressing up like a Muslim and having a beard means you look like a terrorist which sends out the message that all Muslims are terrorists. It's pretty disgusting and the fact it's aimed at children makes it even worse. What kind of message are you giving them?," the report said.
Staff at the shop said the costume had been selling really well although they admitted while some people liked it other customers had pointed out they didn't think it was appropriate.
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