Håkan Juholt, a former leader of the centre-left Social Democrat party and ambassador to Iceland since September, made the comments in an interview with the Svenska Dagbladet newspaper.
"How old is your son? Four?" he asks the reporter.
"When he is old he won't be living in a democracy but in a technocracy, or a dictatorship. It's sad as hell. I am sorry to say it, but I am 100 percent sure. We are in the process of dismantling democracy."
Later in the interview, he says: "I don't think the threat is a dictatorship with tanks rolling on Sergel's Square (a well-known square in central Stockholm), but an expert rule where we do not let the citizens' values govern the country. Democracy is slipping through our fingers. Fewer people want to be elected, the parties are toning down their ideology. Sure, I see a risk that it may become a dictatorship in the long run."
Håkan Juholt in Iceland. Photo: Magnus Hjalmarson Neideman/SvD/TT
Juholt did not elaborate on the comments, which have sparked criticism in Sweden.
"It's remarkable. It is the role of ambassadors, and the role of the government, to deliver an accurate image of our country and promote our country in the world," Culture and Democracy Minister Alice Bah Kuhnke told the TT newswire, but said it was up to the Foreign Minister to comment further.
Margot Wallström responded she would not "argue with one of my ambassadors" in public.
"He will probably have to explain his thoughts himself," she said, speaking to TT at a meeting of EU foreign ministers in Luxembourg.
"He will probably also soon learn, I would think, what it means to be an ambassador."
Criticism has come from both sides of the political aisle. Karin Enström, foreign politics spokesperson of the conservative Moderate party, the largest opposition party in parliament, told TT:
"As ambassador and thus Sweden's top representative in Iceland, Håkan Juholt demonstrates a strange attitude towards the country he is supposed to represent."
Juholt took over as party leader of the Social Democrats in 2011 after a devastating election loss the year before. Known as outspoken and jovial among his fans, a bumbling fool among his critics, he was ousted after less than a year and stepped down on January 21st 2012, following questions over the housing allowance for an overnight Stockholm apartment he stayed in at the time with his girlfriend.