The primary school textbook, which teaches cursive handwriting, used the picture of Jesus on the page for the letter 'I' - to represent Idol.
Ampareen Lyngdoh, education minister of Meghalaya state, strongly criticized the illustration.
"I am appalled and condemn the violent pictorial presentation of Christ. The children for whom the textbook was meant look up to Christ with reverence, and they are shocked beyond words," Lyngdoh said.
The government has seized all copies of the textbook from schools and bookshops in Meghalaya for offending public sentiment, she said.
The book, published by a New Delhi-based company that specializes in textbooks, was being used by a chain of privately run primary schools in Meghalaya.
More than 70 percent of the state's 2.32 million people are Christian.
Copies of the textbook were ready for distribution in at least 10 more schools in Meghalaya before the picture was brought to the notice of authorities.
"We have directed the district magistrate to go ahead with legal proceedings against the publisher," Lyngdoh said. She did not say what legal proceedings the government planned to pursue.
Christians leaders in Meghalaya were outraged by the book and called on federal Education Minister Kapil Sibal to take action against the publisher.
"We are shocked to say the least. How can anyone think of publishing such a picture?" said Dominic Jala, the archbishop of Shillong, the state capital.
"This has been done deliberately with malicious intent," Jala said.
In New Delhi, a spokesman for the Catholic Bishops' Conference of India said it had ordered Christian schools across the country to remove all textbooks published by the company.
"We have taken a strong stand and decided to boycott the publisher," said CBCI spokesman Babu Joseph.
In 2006, the government in the northern Indian state of Uttar Pradesh banned a school textbook that carried portraits of the Prophet Muhammad and arrested the publisher after Muslim leaders protested. Islam generally does not allow depictions of Muhammad. The case against the publisher is still in court.