Dr. Martens' parent company Airwair said it did not commission the advertising, which only ran in the in the UK's music title Fact Magazine, and had therefore "terminated its relationship with the responsible agency".
The client reportedly asked the creative agency not to release the images, which also feature former Clash guitarist Joe Strummer and punk legend Joe Ramone.
Kate Stanners, executive creative director at Saatchi & Saatchi, said: "We believe the ads are edgy but not offensive.
"There has been blog commentary both for and against the ads, but it is our belief that they are respectful of both the musicians and the Dr. Martens brand.
"We regret that the controversy has led Dr. Martens to terminate the contract with Saatchi & Saatchi."
The use of the images in the campaign has already brought condemnation from Cobain's widow Courtney Love, whose publicist said that she did not approve any use of photographs of her husband for use by Saatchi & Saatchi. Love currently controls the majority of Cobain's estate along with the singer's daughter Frances Bean Cobain.
Under UK law the creative agency did not have to ask permission to use the images as, unlike in the US, permission does not have to be granted by a deceased person's estate.
David Suddens, chief executive of Airwair, said: "Dr Martens is very sorry for any offense that has been caused by the publication of images showing dead rock icons wearing Dr Martens boots.
"Dr Martens did not commission the work as it runs counter to our current marketing activities based on FreeDM, which is dedicated to nurturing grassroots creativity and supporting emerging talent."
Stanners said: "We are investigating the circumstances and considering the ongoing employment of the individual who was in breach of instructions not to distribute the ads further than the original approved placement in Fact Magazine in the UK.
"While we believe the creative is a beautiful tribute to four legendary musicians, the individual broke both agency and client protocol in this situation by placing the ads on a US advertising website and acting as an unauthorised spokesperson for the company."The images of the late rock icons were sourced from picture library Corbis and cleared to run in the ads in the UK. The award-winning photographer Dimitri Daniloff shot the ads