Asylum seekers have reportedly been forced to wear brightly coloured wristbands by a Home Office contractor supplying accommodation in Cardiff.
The wristbands have been handed out to asylum seekers staying at Lynx House in Cardiff so they can claim breakfast, lunch and dinner.
The move follows asylum seeker homes in Middlesbrough being inadvertently "branded" by housing suppliers who had painted their front doors red.
The Welsh Refugee Council (WRC) claimed the wristbands echoed the yellow star Jewish people were forced to wear during the time of Nazi Germany.
Housing bosses said the bands are discreet and do not single out residents.
Cardiff Central MP Jo Stevens said that the use of the wristbands would end from Monday.
WRC policy officer Hannah Wharf said: "We have raised the matter many times with the Welsh Government. It harks back to the Nazi regime with people being forced to wear a Star of David and stand out.
"It's absolutely appalling, it is treating people like lesser beings. It is treating them like animals lining up to feed."
Plaid Cymru leader Leanne Wood said the Home Office should face "serious questions" about the situation.
She said: "I have been told that this alarming practice of forcing asylum seekers to wear coloured wristbands will be stopped.
"It is understandable the Home Office requires asylum seekers to carry some form of identification for practical reasons such as when they collect meals.
"However, such a visible indicator is unnecessary and has left a community already under suspicion open to further harassment and distress.
"I will be writing to the Home Secretary to seek assurance that this practice will not be repeated anywhere else in the UK."
The Home Office declined to comment on the matter, saying it was "an operational issue" for Clearsprings Ready Homes.
Clearsprings confirmed in a statement that it is reviewing its use of wristbands.