The 18-year-old, who is yet to be named, was captured on video working her way through holidaymakers at a nightclub in the island’s notorious party capital of Magaluf.
Donning pink hotpants and a white vest top, she was cheered on by revellers as she moved from man to man, encouraging each of them to take their trousers down.
The two-minute footage was later posted online and quickly went viral, sparking outrage among local politicians and women's rights groups.
Last night, police launched an inquiry into the incident, which took place during an event organised by Carnage Magaluf at Alex's Bar.
Now, it has been claimed that the girl agreed to perform the sex acts after being told by party organisers she would win a 'holiday' for taking part.
But her prize, in fact, reportedly turned out to be a cocktail named 'Holiday', made from gin, vodka, peach schnapps, blackcurrant liqueur and fruit juice.
A man called Kieran, 26, who said he was at the club at the time, told The Sun: 'The girl was being encouraged to drink more and more and was told she would win a 'holiday' if she took part in this game.
'Unfortunately the 'holiday' turned out to be the name of a cocktail. I feel sorry for her now. She must feel awful.'
The shocking video, posted on local newspaper sites, shows the DJ apparently counting the number of men the girl notched up on the dancefloor, while playing the song Sexy and I Know It.
The men can be seen sporting T-shirts from Carnage Magaluf, a company which takes young Britons on pub crawls, which is not linked to Carnage UK, a separate party organiser.
Meanwhile, several holidaymakers are captured taking photos of the 'game' on their mobile phones.
The girl, who reportedly works as a mobile phone sales rep, is believed to have flown to Spain for seven-night holiday with a friend last month.
Locals immediately suggested she was British, as are the vast majority of tourists in a resort which has a reputation for excess.
Party capital: The unnamed girl was captured on video working her way through men at a nightclub in Magaluf (file picture). Today, it emerged she was told she would win a 'holiday' - but it was just the name of a £4 cocktail
The footage has been described as a new low in Magaluf, where pub crawls were regulated for the first time this year following complaints.
Mayor Manu Onieva voiced his ‘absolute indignation’ and said police were investigating the practice that local press have dubbed ‘mamading’ – a play on the crude Spanish word for a sex act, ‘mamada’.
Benefits Street star White Dee was a guest of Carnage Magaluf in May and was photographed at a party wearing the company’s T-shirt.
Footballer Nathan Redmond was among Twitter users who condemned the act, calling it 'sickening'
Under Ellie Stevenson branded the footage 'vile' as social media users took to Twitter to vent their outrage after the minute-long clip was posted
The 42-year-old mother of two, real name Deirdre Kelly, claims £10,000 a year in benefits but flew to the resort despite being ‘too depressed’ to work. She returned to the resort last month and had been due to go on another pub crawl organised by the firm.
Dozens of posts about the incident appeared on the firm’s Twitter feed, with some claiming it happens ‘everywhere every day’.
Reports said other tourists were being offered free drinks in similar sex competitions.
Backlash: The images have provoked a debate on Twitter, with some coming to the defence of the girl
Spain’s Women’s Institute called it ‘degenerate, discriminatory and unfair’ towards women.
The More for Majorca opposition party demanded that the activity be penalised, saying it was ‘an absolutely irresponsible and unhealthy way of enjoying leisure time’.
Politician David Abril asked: ‘Where is the responsible tourism we all want?’
Residents of Magaluf have long complained about drunken Britons wreaking havoc on the island, injuring themselves during all night drinking sessions and blocking off roads through towns.
Famous faces: Georgie Shore's Jay Gardner (pictured, left, in the video) featured in the footage, but did not take part in the sex game. Meanwhile, Benefits Street star White Dee (right) was a guest of Carnage Magaluf in May
Meanwhile, Geordie Shore's Jay Gardner has confirmed he also featured in the video as the girl asked him whether he wanted to be 'number 25'.
The reality TV star can be seen at the end of the footage sticking his middle finger up at the blonde woman, who then walks away.
Speaking to The Mirror, he said he been taking part in the bar crawl, but had decided not to take part in the sex game, calling it 'the most shocking thing I've seen.'
'The girl was being encouraged to drink more and more and was told she would win a 'holiday' if she took part in this game'
Kieran, 26, holidaymaker
However, he added that he would not hesitate to go back to the infamous party island.
The paper also reported that young Britons taking part in the bar crawl had been plied with unlimited free alcohol for more than four hours before the video was shot.
The destination, popular for its cheap clubs and bars. Magaluf has earned its reputation as one of the top places for drinking and clubbing holidays in Europe.
It is especially popular with British tourists, who will fill the hundreds of bars on a 24-hour basis until September.
Carnage Magaluf could not be contacted.
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