Pedestrians took videos of the man's tirade as children cried and parents became agitated.
The man urged people to read The International Jew, an infamous anti-Semitic pamphlet written by auto tycoon Henry Ford in the 1920s, reported the Daily Mail.
In the video that was captured on Sunday, one man is heard telling the man to leave and stop bothering the children in the area.
Get a real job, you're irritating kids, one parent is heard saying to the costumed man.
I'm not making money because the Jewish cops have got to keep harassing me, he responded, according to the Daily Mail.
The man also was heard yelling about Abraham Foxman, the head of the Anti-Defamation League.
If you start your own business in this city, Jews will harass you, the man screamed.
That is the scariest Elmo I've ever seen in my life, said a young woman on the video, according to the Smoking Gun. Oh my God.
Police arrived on the scene and hauled him away. The man in the costume, whose name was not released because he was not officially arrested, was taken to the Metropolitan Hospital Center for a psychological evaluation, reported the New York Times.
This is not the first time the unidentified man had screamed obscenities and verbally berated Jews while wearing an Elmo costume. He reportedly used to stand around yelling on Broadway between 42nd and 43rd Streets in Times Square, much to the annoyance of other costumed impersonators.
He would stop and say that we were all illegal immigrants and that people shouldn't have their photos taken with us, said Luis, who would not give his last name, reported the New York Times. Luis had been working as a costume impersonator for about six months, living off donations for being photographed with children. Whenever he saw the ranting Elmo, Luis would walk away from him.
A spokesman for Seseame Street Workshop, the nonprofit group that produces Sesame Street, said the organization would not comment on the incident, but that would not condone unauthorized impersonators.
The 'Sesame Street' Muppets are known the world over, and we do not condone unauthorized representations of our characters, a statement released Monday said, according to the New York Times.