The banner, proclaiming that the “Holocaust is an historical lie”, was hung outside Rabin park overnight, Rai News reported.
The park, on Rome’s via Panama, was named after Yitzhak Rabin, a former Israeli prime minister who was assassinated in 1995.
The banner, which was signed “Militia”, the extreme right group, also paid tribute to the German dictator Adolf Hitler, saying “Hitler for a thousand years”. It has now been removed by police.
The millions who were killed in the Holocaust are remembered each year on January 27th, when Auschwitz-Birkenhau was liberated, with this year marking the 70th anniversary since the camp’s liberation.
Italy’s Prime Minister Matteo Renzi posted on Twitter that "Italy honours and remembers the memorial day, seventy years after the liberation of Auschwitz. Never again".
Last year, extremists in Rome marked the anniversary by sending boxes containing pigs' heads to the capital’s Israeli embassy and synagogue.
The Italian Jewish community is one of the oldest in Europe, and numbered 50,000 in 1938.
Today, there are around 30,000.
In the years leading up to the Second World War, there was thought to have been very little anti-Semitism in Italy, with Jews holding prominent positions in parliament, the military and the media. They were also allowed to join the National Fascist Party.
The Italian dictator Benito Mussolini, having joined forces with Adolf Hitler, led the country to war alongside Germany in 1940. Jewish people living in Italy were then sent to camps including Campagna and Ferramonti di Tarsia.
Italians refused to cooperate with the Nazis in sending Jews to German concentration camps, but this changed when, in 1943, Italy joined the Allies.
Thousands of Italian Jews then perished after the Germans invaded and sent them to Nazi death camps that year.