The logo and slogans of A Mild cigarettes, produced by a Philip Morris affiliate, featured prominently in promotional materials for the concert.
The Washington-based Campaign for Tobacco Free Kids anti-smoking organization initially drew Keys' attention to the company's association with the show.
In a letter released by her record company, Sony BMG Music Entertainment, she said she had asked the company to stop the branding.
Philip Morris International did not say whether it was demanding its money back, nor reveal how much it had paid to sponsor the event.
"Whether tobacco sponsorship of music events leads to youth smoking is a matter of serious debate," the company said in a statement received Thursday. "Having considered the facts in this specific instance, we have decided to withdraw all branding associated with this concert."
More than 30 percent of Indonesia's 220 million people smoke, making it the fifth-largest tobacco market in the world, according to the World Health Organization.
In the United States, Philip Morris USA and other major tobacco companies are prohibited from sponsorships of concerts, but there are no such regulations in Indonesia. The affiliate, HM Sampoerna, regularly sponsors sports events and pop concerts in Indonesia.
Philip Morris was not the sole sponsor of the concert, but the event is billed as an "A Mild Live Production," suggesting it is a major backer.
With health campaigns taking a toll on cigarette sales in the West, tobacco companies are focusing marketing campaigns on developing countries like Indonesia, behind China, the United States, Russia and Japan.
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