The supermarket claims customers who buy its Localchoice milk are "helping to support their local farming community".
But the Heart of England milk it sells in Hereford is produced at dairy farms in Lincolnshire and Derbyshire - a three-hour drive away.
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Martin Clunes in the Tesco advert for local milk
A spokesman for Tesco insisted local "means different things to different people".
"Customers view food from their region as local - as opposed to food produced a specific number of miles away from a store," he added.
"Heart of England milk, as the name suggests, is sourced in the Midlands."
Friends of the Earth accused Tesco of not being straight with its customers.
"I think it's misleading," said Sandra Bell, supermarket campaigner for the environmental group.
"It's true that local may mean different things to different people but I think only Tesco would define local as 150 miles away.
"Our food is travelling further than ever before and supermarkets like Tesco are a major cause of that."
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