Article continues Members of the Church in Wales said yesterday it was ironic that the cartoon had been used to illustrate an article calling for tolerance between members of the Abrahamaic religions (Christianity, Islam and Judaism) on the basis of their common roots.

All copies of Y Llan ("Church") will now be collected and destroyed.

Mr Williams's use of the drawing was denounced as "a gross error of judgment" by the Archbishop of Wales, Barry Morgan. "The article was perfectly OK, but for some reason the editor decided to print one of these cartoons," he told the BBC. "It no way reflects the policy of the Church in Wales and when I saw it I was horrified. We recalled all the papers, I personally picked up some from some churches, and they have all been pulped."

Muslims object to any depiction of the prophet and the controversy follows worldwide protests at the publication of cartoons, first in Danish newspapers and then earlier this year in Norway, France, Germany, Italy and Spain. The Church in Wales criticised the use of the cartoons.

Sion Brynach, spokesman for the church, said an investigation had been launched. "Despite the publication's small circulation, we are concerned about the possibility of causing any offence to the Muslim community in Wales - with whom the Church in Wales has an excellent relationship - as a result of the reproduction of this cartoon," he said.

"A letter from [Dr Morgan] was sent to all the publication's subscribers last week requesting that they return their copies. The archbishop has also been in touch with the leaders of the Muslim community in Wales to proffer an apology for any offence caused."

Saleem Kidwai, general secretary of the Muslim Council of Wales, said Dr Morgan had telephoned him immediately to say sorry and had apologised again at a face-to-face meeting.

"The archbishop has apologised and we have accepted that apology," said Mr Kidwai. "We enjoy an extremely good relationship with other faiths, particularly the Jewish and Christian faiths. We regard this as an unfortunate mistake. Inter-faith relationships need not be jeopardised by the incident."

Jane Hutt, equality member in the Welsh assembly, said publication of the cartoon had been "extraordinarily inappropriate". "I'm glad to hear that the editor has resigned for that," she said. "I'm glad there has been an apology from the archbishop to the Muslim Council of Wales.

"We always think of Wales as a tolerant nation and there's a welcome in Wales. We also know that this kind of thing can set this back so I'm glad that the Church in Wales has faced up to it."

Mr Williams was not available for comment yesterday.

The Archbishop of Wales is a member of the Lambeth Commission