Fellow pundit Lee Dixon gave host Gary Lineker a horrified glance as the former Liverpool and Scotland defender used the word twice to refer to non-white players during the BBC's football highlights show last night.
Hansen's comments sparked a fierce debate on Twitter, with some believing the word was unacceptable and others arguing his wording was not meant maliciously.
The 56-year-old's gaffe came as racism in football was placed under the spotlight following the news that England and Chelsea captain John Terry will be prosecuted over allegations he racially abused Anton Ferdinand. Liverpool's Luis Suarez was also handed an eight-match ban by the FA this week over racial comments aimed at Manchester United's Patrice Evra.
On last night's show, Match Of The Day host Lineker asked Hansen if he believed racism was "rife" in English football. Hansen replied: "No it's not ... I think it's better, not only with the players but with the supporters. I think there's a lot of coloured players in all the teams, all the major teams, and there's a lot of coloured players that are probably the best in the Premier League and, as I say, if you look 25, 30 years ago, it was probably in a bad way."
Ex-Liverpool player Stan Collymore led the protests against his choice of language, saying: "What colour would that be? Blue? Green? Orange?" Former Tottenham player Rohan Ricketts tweeted: "Is this Alan Hansen guy taking the f****** p***?? I'm not coloured??? He is part of the problem when using that word."
Rapper Example waded in, saying: "Please don't sack Alan Hansen. He's a superb pundit. So many guys from that era seem to make the same mistakes. At least his wasn't malicious like Ron Atkinson."
Hansen said today: "I unreservedly apologise for any offence caused. I deeply regret the use of the word."
Terry was told yesterday that he faces criminal charges over video footage appearing to show him shout an offensive comment at Queens Park Rangers defender Ferdinand. The Chelsea defender faces a maximum fine of ?2,500 if convicted.