Written above the photo of the woman, used to advertise fashion group Flash&Partners's clothing brand Nolita, are the words: "No Anorexia."
The picture was shot by the controversial Italian photographer Oliviero Toscani, who in 1992 photographed a man dying of AIDS for a campaign for clothing group Benetton.
Toscani's aim was "to use that naked body to show everyone the reality of this illness, caused in most cases by the stereotypes imposed by the world of fashion," Flash&Partners said in a statement.
"Everyone says it's ugly but I don't think it is, it really brings the message home," said passer-by Giuseppina Ravelli after seeing the billboard in Milan.
"The people who reach these kind of levels have such great problems it is good that they use their illness to teach others about it."
But the president of Italy's Association for the Study of Anorexia, Fabiola De Clercq, said the woman used for the photo should be in hospital and the image was "too crude."
Far from helping women suffering from anorexia, the photo may make many of them feel envious of the model and determined to become even thinner than her, she said.
Super-skinny models gained mass media attention last year after Madrid Fashion Week banned girls with a body mass index of below 18 from its catwalks (18.5-25 is considered the "normal" range).
Milan responded by announcing a new catwalk code of conduct which obliges models to carry medical certificates, and opened fashion week with a show featuring more shapely models.
Isabelle Caro, the French woman who appears in the photo, has been anorexic for 15 years, weighs 31 kg and suffers from the skin disease psoriasis.
"I hid myself and covered myself up for too long," she told Vanity Fair magazine in an interview published on Wednesday.
"Now I want to show myself without fear even though I know my body is repugnant."
The Nolita campaign has received backing from the Ministry of Health, and the statement quotes Health Minister Livia Turco saying it can "promote responsibility towards the problem of anorexia".