According to a report in The Western People, a group of four or five individuals, who are believed not to be from the north-west Co Roscommon town, handed out the literature in the town centre on Saturday.
The literature makes reference to terrorist groups such as Islamic State and Al Qaeda. It also urges the people of Ballaghaderreen to “preserve freedom in the West” by refusing Muslims entry into Ireland and to “crush them once and for all”.
The leaflets is also understood to carry images of rapes, beheadings, and crucifixions.
Local Sinn Féin councillor Michael Mulligan told The Western People he had been given one of the leaflets and was shocked by its contents.
“I have to condemn this outright,” said Mr Mulligan. “It is incitement to hatred. I have never seen anything as bad as this leaflet. The whole thing is just shocking.”
Some 200 refugees are to be housed in the former Abbeyfield Hotel on the outskirts of the town over the next two years.
Last week, it emerged that the owners of the Abbeyfield Hotel had signed a two-year agreement with the Department of Justice and Equality to house the refugees.