TVNZ says a newsreader's use of the term "fag" while discussing equestrian rider Mark Todd's personal life was unintentional and not used to offend.
But members of the gay community said they found presenter Peter Williams' remark during the Breakfast show offensive - whether it was intentional or not.
While commenting on Todd's win in the Badminton Horse Trials, Williams said: "Some of Mark Todd's personal habits frankly don't lend to being ... he's had the odd fag over the years, hasn't he?"
Co-newsreader Corin Dann, giggling, asked: "What did you just say?"
Williams replied: "Cigarette, I meant."
TVNZ spokeswoman Megan Richards said the comment from Williams and any innuendo was accidental and not malicious.
"It seems to have been one of those conversations that went slightly off the rails, where the participants realised they were talking in double meanings.
"Everybody's had the experience of a conversation which has headed off in a direction that they weren't intending."
She said the network had not received any formal complaints.
"It's better not to draw any further attention to it, quite frankly, given that there doesn't appear to be any motivation to offend."
British newspaper Sunday Mirror alleged in 2000 that the Olympic gold medallist had snorted cocaine with a rent boy.
GayNZ.com spokesman Jay Bennie, who had not seen the Breakfast coverage, said the claim that the comment was unintentional was disingenuous.
"I would say bullshit to the fact that he was meant to be referring to a cigarette.
"My reading of it is that maybe that Peter Williams was not intending to hurt, but it doesn't work that way. Fag is short for faggot - it is used to denigrate, in every connotation.
"When it is used by a straight man the context is very different to when someone gay uses it ... it is ill-advised, at least. The difficulty can be that you popularise the word, which just feeds into homophobia."
At the time of the drug-use allegations, Todd refused to comment apart from saying that the Mirror's article was an unjustifiable and disgraceful intrusion.
The claims cast a shadow over the rider's participation in the Sydney Olympics in 2000.
Todd, 55, is one of New Zealand's most decorated sportsmen. He has won two Olympic golds, numerous international eventing titles, and was made a MBE in 1984 and a CBE in 1995.
He won the supreme Halberg award in 1998, and was voted Rider of the 20th Century by the International Federation for Equestrian Sports.
TVNZ Mark Todd fag quip 'offensive'
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