VoteVets.org said the ad will run on broadcast and cable in Virginia for one week.
An Allen spokeswoman said the ad "turns it back on the truth to play politics for veterans’ votes."
"Virginia veterans know that George Allen repeatedly authored and voted for legislation increasing TRICARE benefits and other veterans’ benefits," spokeswoman Emily Davis said in a statement.
Allen released an ad earlier this month hitting Kaine for supporting the debt-limit deal last year that led to the sequestration cuts, which could reduce Pentagon budgets by $500 billion over the next decade.
Sequestration has been a big issue in Virginia, a state with a sizable military presence, and has come up frequently in the debates between Allen and Kaine.
The issue is playing in both the Senate campaign and the tight presidential race in Virginia.
—This post was updated at 4:15 p.m.