It shows a picture of the two year-old being led away from a Merseyside shopping centre by Jon Venables and Robert Thompson.
Bulger was battered to death in 1993 and Thompson and Venables were convicted of the murder. The pair were sentenced to eight years in youth custody before being released in 2001.
Denise Fergus, Bulger's mother, complained to the game's publisher, Legacy Interactive, demanding that the image be removed.
"Using that terrible picture of James as part of a game is sick," she told Sky News. " It dehumanises the memory of my lovely son. To use him in a game is below contempt."
Distributor Global Software Publishing has now withdrawn the game from sale in the UK.
Legacy Interactive has issued a formal apology to the family. "Legacy Interactive sends our most heartfelt apology to the family of James Bulger for the inadvertent use of a background photo in our Law & Order game.
"The image was included in the game years ago and without any knowledge of the crime, which occurred in the UK and was minimally publicised in the US.
"Legacy Interactive is proud of its reputation of providing years of family and educational gaming. This was the first time such an event occurred."
The company has created a patch for the game that removes the photo, and said that the image will be removed from any future printings of the game.
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