The German claimed that the England international is "much worse" than controversial Reds striker Luis Suarez when it comes to simulation.
"If you remember the stick Luis Suarez got, he's cut [diving] out of his game, but Ashley Young is much worse than Suarez has ever been," he told talkSPORT.
"Manchester United, with their reputation, shouldn't need to dive and cheat to win a football match. It's blatant cheating to try to win a penalty when there's no contact. The reputation of the player will suffer as well.
"I would say to Young, 'if you want to stay in the game for the next ten years, you've got to cut that out'. He'll end up not getting decisions any more."
Young came under fire after for his antics during United's Champions League clash with Real Sociedad, in which he won a controversial penalty.
"If the incident against Real Sociedad happened in the Premier League, he wouldn't have got a penalty. He only got it because the referee didn't know him," Hamann added.
"I'm always defending players. Gareth Bale got a lot of stick last year but you've got to be very careful, because sometimes it's about protecting yourself in anticipation of a challenge.
"If someone comes to clatter you you've got to jump because that's your first instinct, to protect yourself. Yesterday [with Young] there was no protection [issue], it was a slight touch on his arm and he stated rolling over. I just think it's in him, it will be very hard for him to cut out. It's gone too far now."
United drew the game 0-0.