The phrase originated in America's deep south in the 19th Century and was used to describe slaves who had fled their captors.
Escapees were said to have hidden in piles of firewood while travelling north to Canada. In a modern context, it is almost universally considered racist and hurtful.
A British politician who used the phrase in parliament 10 years ago faced furore and was called on to resign, before issuing a grovelling apology.
Users on Twitter described Jones' remarks as "disgusting" and "disgraceful", saying he should be sacked or seriously sanctioned.
Jones has apparently used the term on previous occasions and also refused to apologise for it. He uttered it during an interview with Tony Abbott in 2012.
Macquarie Media Limited, which owns the 2GB station, has been approached for comment.
Late this morning, Jones took to Twitter to apologise for the remark.
"We all make mistakes. This morning on 2GB and 4BC I spoke about the covert actions of some political operatives in the current leadership challenges within the Liberal Party.
"I used an old and offensive figure of speech that I regret saying. People should be honest and forthright in their actions and that is not happening in the Liberal Party right now. I will have more to say on this tomorrow."
It's not the first time the firebrand shock jock has attracted controversy.
He was forced to apologise after being caught on tape at a Young Liberals fundraiser in 2012 saying then-Prime Minister Julia Gillard's father had "died of shame".
That same year, Jones also issued an apology for describing Lebanese people as "vermin" and "mongrels".
The veteran broadcaster is currently being sued by the Wagner family, a prominent agricultural dynasty in Queensland, over comments he made in dozens of broadcasts in 2014 and 2015.