The ad began airing on other area stations on Saturday, two days before Bush was scheduled to speak in Salt Lake City to the national convention of the Veterans of Foreign Wars.
However, a national sales representative for KTVX, a local ABC affiliate, rejected the ad in an e-mail to media buyers, writing that it was an "inappropriate commercial advertisement for Salt Lake City".
In the ad, Sheehan pleads with Bush for a meeting and accuses him of lying to the American people about Iraq's development of weapons of mass destruction and its connection to al-Qaida.
"I love my country. But how many more of our loved ones need to die in this senseless war?" a weary-looking Sheehan asks in the ad.
"I know you can't bring Casey back. But it's time to admit mistakes and bring our troops home now."
Salt Lake City affiliates of NBC, CBS and Fox began running the ad on Saturday.
The ads were bought for Gold Star Families for Peace by Washington, DC-based Fenton Communications, which provided a copy of the e-mail from station sales representative Jemina Keller.
Cindy Sheehan (C) and supporters
set up camp outside Bush's ranch
In a statement on Saturday evening explaining its decision, KTVX said that after viewing the ad, local managers found the content "could very well be offensive to our community in Utah, which has contributed more than its fair share of fighting soldiers and suffered significant loss of life in this Iraq war".
Bush carried nearly 70% of the vote last fall in Utah, one of the most conservative states north of the so-called Bible Belt.
Station General Manager David D'Antuono said the decision was not influenced by the station's owner, Clear Channel Communications Inc.
Celeste Zappala, who with Sheehan co-founded Gold Star Families for Peace, said she was puzzled by the decision.
"What stunned me was that it was inappropriate to hear this message," she said.
"How is it that Salt Lake City should hear no questions about the war?"
George Bush is to speak at the
Veterans of Foreign Wars congress
The e-mail read: "The viewpoints reflected in the spot are incompatible with our marketplace and will not be well received by our viewers."
It added that the spot did not qualify as an "issue" advertisement.
For the ad to have been considered an issue advertisement, a ballot measure would have had to be at stake, D'Antuono said.
Mark Wiest, vice president of sales for NBC-affiliated KSL television, said that in the interest of freedom of speech, his station did not hesitate to run the ad. KSL is owned by The Church of Jesus Christ of Latter-day Saints.
"The bigger picture is, by suppressing the message are we doing what is right under the First Amendment and in an open democratic society?" Wiest said.