"The local district attorney in (the eastern town of) Pozega has opened an investigation and is currently looking at the matter," said Martina Mihordin.
The Novi List daily newspaper reported that officials at a small factory in Pozega have confirmed the sugar packs were produced on their premises.
The incident will embarrass the government which has been keen to play down the country's past links with Nazism.
'Revulsion and disgust'
Croatia's Ustasha regime sided with the Nazis in World War Two and enforced ethnic laws under which thousands of Serbs, Jews and Gypsies, as well as anti-fascist Croats, were killed in local concentration camps in 1941-45.
The Jerusalem-based anti-Nazi Simon Wiesenthal Center said in a statement it had protested the matter to Croatia's authorities.
Its director, Efraim Zuroff, expressed his "revulsion and disgust that such an item could be produced these days in a country in which the Holocaust not only took place, but was for the most part carried out by local Nazi collaborators."
"If nothing else, this is a disgusting expression of nostalgia for the Third Reich and a period during which Jews, Serbs and Gypsies were mass-murdered (in Croatia)," it said.
Zuroff urged Croatia to force the factory owners to recall the sugar packets immediately, in line with a law against racial, religious or ethnic hatred.
The ADL said it wrote the Croatian Embassy on February 20 after reports of the sugar packets first surfaced.
“Given Croatia’s history during World War II, when thousands of Jews, Serbs, Gypsies and anti-fascists Croats were murdered in concentration camps by the Nazi-allied Ustasha regime, it is shocking that such a product would appear in cafés in Croatia,” wrote ADL Director Abraham Foxman, and National Chairperson Glen Lewy.
Under President Franjo Tudjman, who governed Croatia from its 1991 independence until 1999, some of the Ustasha symbols were tolerated and their crimes often dismissed in public, which strained relations with Israel.
Subsequent Croatian leaders, who set the country on the road to European Union membership, apologized publicly for the Ustasha crimes.