The ex-Two and a Half Men star sent a 'cease and desist letter' to Cheetah's club in New York, which had named a VIP room in his honour.
Visitors could eat sushi from the bodies of scantily-clad dancers in the Charlie Sheen Room, the Daily Mail reports.
Guests were charged $250 (£155) to dine in the room, which was covered with photos of the actor.
Club boss Sam Zherka, who said Sheen threatened to sue for millions if his name was not removed, commented: "How could sushi damage Charlie Sheen's reputation?
"We thought dedicating a room to dine in his honour would help repair and elevate his image. He should have called us up and thanked us."
However, the club has complied, with Zherka saying: "We have now removed his name, he wasn't doing big business anyway. We had a little ritual and threw his image in the garbage - a celebration of Charlie Sheen being dumped."
The actor's lawyer Marty Singer told the New York Post: "This matter has nothing to do with Sheen's reputation. You can't use any celebrity name to promote business without permission. They had no right to use his name."