RCMP are investigating the incident which is believed to have occurred sometime Friday.
The head of the MMF said he believes the attack is rooted in discrimination.
"It's very disheartening," said MMF president David Chartrand. "Clearly there are some people out there who don't believe in Metis rights or in the Metis people as a nation but we will not be deterred."
The sign -- which reads: "Local Metis Government Welcomes You to St. Rita" -- has stirred up emotions in this community just 50 kilometres east of Winnipeg. Some locals say it leaves the impression that the community is governed by the MMF. They feel that could discourage potential development.
Chartrand said the sign, which is on private property, was put up as a show of Metis pride and not to supplant the local government.
Andy Pelletier, the councillor for the area, said emotions have been running high in the community but said he was surprised someone would vandalize the sign.
It appears it was set on fire two days after the community held a townhall meeting to discuss the issue.
"I condemn what happened," said Pelletier.
Pelletier, however, said the majority of people in the town want the MMF to remove the sign or at least get rid of the word government. He said he's hoping to set up a meeting with Chartrand in the coming week to see if something can be worked out.
Chartrand said he has no plans to change the wording of the sign. He said it's sad that the incident comes as the nation is getting ready to celebrate Canada Day.
"It's very disrespectful," said Chartrand.
The sign, which is four-by-eight feet and worth about $4,000, was designed by a Metis artist. Chartrand said the bottom portion, which features the provincial and national Metis flags, was destroyed.
He said his staff has spoken with the RCMP and the police agency's aboriginal liaison officer.
"I know the RCMP are taking this very seriously," said Chartrand. "Things have gone too far."
The MMF is composed of dozens of locals throughout the province, including one in St. Rita. The MMF is planning on putting up signs on those areas and will be replacing the one in St. Rita.