"I apologise for the comments I made last night at the annual Caddie Awards dinner in Shanghai," Williams said in a statement he posted on his website (www.kiwicaddie.co.nz) after he was shocked to find that his remarks had been leaked to the press.
The dinner was attended by 100 caddies, players and guests and all had accepted their invitations on condition that they would not disclose what happened at the ceremony.
"Players and caddies look forward to this evening all year and the spirit is always joking and fun. I now realise how my comments could be construed as racist."Williams on remark Quotes of the week
The dinner was held after the second round of the WGC-HSBC Champions.
"Players and caddies look forward to this evening all year and the spirit is always joking and fun. I now realise how my comments could be construed as racist," said Williams.
"However I assure you that was not my intent. I sincerely apologise to Tiger and anyone else I have offended."
Williams had been a regular caddie for Woods since 1999 and helped the American to win 13 of his 14 majors before being let go in July.
The New Zealander hit out at the manner and timing of the split and a month later was in the news again after his new employer, Adam Scott, won the WGC Bridgestone Invitational at Akron, Ohio.
Williams told reporters at the time: "It's the most satisfying win I've ever had, there's no two ways about it. It's the greatest week of my life caddying and I sincerely mean that."
He later apologised for those comments, saying his emotions got the better of him.
Williams had been called up onto the stage at the private function late on Friday to receive the "Celebration of the Year" award and, while there, he was asked to comment on how he felt at winning again with Scott so soon after leaving Woods.
The tournament organisers in Shanghai decided not to involve themselves in what Williams said.
Press officer Michele Mair said: "This was a private function. There will not be any further comment on this matter."
There was no reaction either from European Tour officials, although it is their policy not to discuss any disciplinary action taken.
Scott, lying third in the WGC-HSBC Champions with a round to go, said he disagreed with those who think he should dismiss Williams as his caddie.
"Steve issued a statement and apologised and he did the right thing. That's all there is to say about that from my side of things," he said.
"It's not an issue for me. I think everything in that room last night was all in good spirits and a bit of fun and I think it probably got taken out of that room in the wrong context.
"Anything with Tiger involved is a story. I value Steve's contribution to my game and while he's caddying I hope he can caddie for me.
"There was a lot of language used last night and it's just this was reported.
"I don't really think that stuff has ever left the room before and it's probably good reasons why. I think it's probably all very unnecessary."
Asked if he thought Williams was a racist, he replied: "I don't think so. I think we all know that's not the case."
Scott also said he had not felt the need to confront Williams about the issue.
"It was already dealt with. It's been dealt with as far as I'm concerned. I thought it was all in jest. That's how the whole evening was - everything was quite amusing.
"Those things are not meant to go past that room, but obviously somebody took it out and that's the way it goes.
"There's really no safe haven for what you say and so you've got to be careful."
The world number eight does not believe it will make life more awkward for him over the coming two weeks when he and Woods are both competing at the Australian Open in Sydney and then the Presidents Cup in Melbourne.
"I don't think it makes it harder for me - I don't think I'm the guy that's having a finger pointed at or on the receiving end," Scott added.
"I don't think I've done anything wrong.
"I'm the guy stuck in the middle, but I don't really have a gripe with either guy. It's for them to sort out between themselves."
Northern Irish star Graeme McDowell was present when Williams spoke at the caddie dinner and said: "The comments were surprising, yes.
"I'm aware that he's released a statement this morning apologising. I would doubt severely if he meant it racially like it came over and hopefully his apology will in some shape or form settle the matter.
"We don't want something made out of nothing. It was a fun night and we really hope that it doesn't become too big of an issue.
"There were a lot of things said last night - jokes made, fun was taken - and things got a little bit out of hand.
"These are racially sensitive times, especially in sport. It's unfortunate because it was a very sticky situation.
"I kind of feel bad for him in many ways because, like I say, it was a very humorous evening and it's unfortunate that it's come out as negatively as it did.
"Should he be sacked (by Scott)? I don't know. I hope he can resolve it - he's a character within the game of golf and whatever bitterness that exists between him and Tiger should be in the past by now.
"It's unfortunate that it's going to rear its head again.
"I don't think Stevie Williams was trying to be racial. I don't think it was a racial comment. I think he was trying to be funny and make a joke of it.
"It was an embarrassing situation that he was put in. He was up in front of his peers and colleagues and it came out wrong."
Rory McIlroy commented: "It's just unfortunate that there's been such an argument between a player and a caddie.
"I've heard that since then Stevie has apologised for his comments, and I think now that he's done that everyone can just move on and sort of put it behind them."
Williams will have a chance to apologise to Woods in person next week at the Australian Open in Sydney.
Woods is already in Australia and was told about the remark.
His agent Mark Steinberg was reported as saying: "If multiple reports, which all seem to be accurate, are true, then it's sad it's come down to this.
"It's a regrettable comment and there's really nothing that Tiger can do or say. He's just going to move on."
Three years ago at a dinner in his home country, Williams made a disparaging remark about Phil Mickelson and Woods got him to apologise.
He has never been the most popular of caddies and his standing has now taken another knock.
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