He eventually apologised by giving her two bottles of his own pinot noir wine.
However, Mr Key said today he was just having fun and hoped it would not turn the New Zealand public against him.
Mr Key said the ponytail-pulling was the complete opposite to an abuse of power.
He brushed off the idea people were calling him "creepy" after the incident came to light.
"I think it's the opposite to what some people might think that there's a power imbalance.
"There'll always be people that will call me names but there's also a lot of people that know me well. There's people that know I'm a friendly guy that likes to interact with the public and have a bit of a laugh."
He said he needed to make sure he was "a bit more careful" in the future but denied it had affected his credibility.
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"I've been having a bit of fun but actually in doing that I have badly misread the situation ... I do like to have a bit of a laugh and I'm probably the most casual Prime Minister New Zealand has had," Mr Key said.
"I have to take total responsibility for that. I shouldn't have done the things I have done."
Mr Key also came under fire in the interview about the lack of transparency around the deployment of New Zealand troops to Iraq this week.
He said, despite the criticisms, the majority of New Zealanders thought it was the right thing to do.
There were a range of reasons for the deployment but the main one was to fight the growing Islamic State of Iraq and the Levant jihadist group (ISIL), he said.
"If ISIL became a much stronger force then New Zealand will suffer."Unless we help degrade that risk, I think they'll present a greater threat."