The local council says it is disrespectful to the nuns who ran the convent.
Tenby Town Council is urging planners to refuse permission for the sign which depicts a nun lifting her bodice. But it supports plans to turn the convent into a luxury hotel, restaurant and bar.
The convent was home to nuns until 1996. It had been a boarding convent school prior to that.
Businessman Sean Roche has submitted two separate applications for the hotel which he plans to call The Convent.
The final decision on the applications rests with the Pembrokeshire National Park Authority and its members are set to discuss the applications next month.
Meanwhile a Swedish artist has unveiled a sculpture depicting Christ as a well-endowed dog. He says he wants to stimulate debate about religion and freedom of expression in the wake of a row over cartoons of the prophet Mohammed.
The artwork shows Jesus as a dog with a bloodstained head under a crown of thorns and an "enormous sexual organ".
But within hours of the sculpture being installed on a roundabout in Skaanes Fagerhult, a town in the south of Sweden, it disappeared.
'Topless' nun sign angers council (BBC News, 26/9/07)
Controversial Christ as dog sculpture unveiled (ABC News, 26/9/07)