Stefan Löfven, who fronts the poll-topping Social Democrats, was left scrambling on Monday after an interview with Sveriges Radio (SR).
During a conversation about beggars in Sweden, Löfven said he supported EU programmes "that ensure the Romani and the gypsies can integrate properly".
The choice of words caused a splash in the Swedish tabloids, and Löfven offered an apology soon after.
"I'm terribly sorry and I deeply regret using the expression," he later told the Expressen newspaper.
He said that the word was "archaic, outdated, and offensive".
The word zigenare was once used freely in Sweden, reported the TT news agency, but has come to be accepted as a derogatory word.