The cover depicts Elden as a four-month-old in a swimming pool, grasping for a dollar bill that's being dangled in front of him on a fishing line.
Now 30, Elden says his parents never signed a release authorising the use of his image on the album.
He also alleges the nude image constitutes child pornography.
"The images exposed Spencer's intimate body part and lasciviously displayed Spencer's genitals from the time he was an infant to the present day," legal papers filed in California claim.
Non-sexualised photos of infants are generally not considered child pornography under US law.
However, Elden's lawyer, Robert Y. Lewis, argues that the inclusion of the dollar bill (which was superimposed after the photograph was taken) makes the minor seem "like a sex worker".
The legal case also alleges that Nirvana had promised to cover Elden's genitals with a sticker, but the agreement was not upheld.