Chengdu-based Cute Pet Games revealed the dogs, which have had black spots added to their white fur to make them resemble pandas, earlier this week.
The cafe was reportedly offering the service for 1,500 yuan (£165) to those wanting to give a makeover to their dogs.
But controversy started after a social media page called People's Network posted a video of the dogs engaging with customers at the cafe on Weibo.
The post included the disclaimer: "Pet dyeing is not recommended and may cause damage to hair and skin."
Users on Weibo, which is China's biggest social media platform, hit back at the cafe. One commented: "Why do you treat dogs like this?"
Another added: "Although it looks very cute after dyeing, it is a kind of injury and abuse to the animal!"
Following the criticism, the cafe says it will no longer offer the service, but insisted the dogs were not harmed.
The cafe's owner, reportedly told local media: "We wanted to do something different, to differentiate us from other regular dog cafes and pet shops."
In a statement posted on Weibo on Tuesday, the cafe said: "Their lives are much better than ours. They are also very healthy. Netizens please don’t project your thoughts on to us."
Chengdu is famous for its pandas, with projects encouraging their breeding around the Sichuan province city.