No.
The original material was bakelite, and not made by mattel.
After that, the handguards were fiberglass and the pistol grip and stock were plastic, but not made my Mattel.
Only one thing true about this, though:
In the John Wayne film, “The Green Berets” (1968), John Wayne smashes the “M-16” of fallen Sergeant Kowalski (Mike Henry) against a tree. You can see that it isn’t a real M-16, but a toy rifle made by Mattel around that era. The rifle splinters into a number of plastic fragments and you can see the oversized waffle mag.
You can’t smash a real M-16 that easily.
Snopes agrees with you
http://www.snopes.com/military/m16.asp