Responsibletravel.com, which introduced an offsetting option in 2002, said the travel industry's priority must be to 'reduce carbon emissions, rather than offset'.
'Too often offsets are being used by the tourism industry in developed countries to justify growth plans on the basis that money will be donated to projects in developing countries,' said responsibletravel.com managing director Justin Francis.
'Global reduction targets will not be met this way,' he added.
Mr Francis said his company was now advising its customers to fly less, travel by train and take holidays closer to home.
'We will continue to offer a more responsible choice of overseas holiday so that when tourists do fly they can 'make their holiday count' by choosing a more responsible holiday,' he said.
It is not clear whether other travel agents will follow responsibletravel.com's lead. ABTA, the trade body that represents travel agents, said it was still advising its members to offer carbon offsetting to customers.
'If we stopped taking holidays it would leave people in developing countries worse off but we can do things that offset that negative part of travel, namely flying,' said ABTA spokesman Keith Richards.
Abta's 'Reduce my Footprint' scheme
Friends of the Earth report: A dangerous distraction