Steve Williams, the most high-profile caddie in professional golf, was at the centre of a race row on Friday after describing his former employer Tiger Woods in racially insulting terms.

The New Zealander, who was fired by Woods earlier this year and has since joined up with the Australian Adam Scott, made the comment while on stage at a "caddie of the year" awards ceremony in Shanghai. He was being honoured for the "celebration of the year", an ironic acknowledgement of his emotional reaction in the aftermath of Scott's victory at the Bridgestone Invitational last summer.

The caddie described his new employer's triumph at the time as the "greatest victory of my career". Asked on Friday to explain why he had made such an obvious exaggeration given that he had caddied Woods to 13 major championship wins, Williams said: "I wanted to shove it up that black arsehole."

The comment was made in a room packed with many of the world's leading golfers and tour officials, who are in Shanghai this week for the HSBC Champions event. It caused a sharp intake of breath, according to eyewitnesses.

The caddie later apologised on his personal website, saying: "I apologize for comments I made last night at the Annual Caddy Awards dinner in Shanghai. Players and caddies look forward to this evening all year and the spirit is always joking and fun. I now realize how my comments could be construed as racist. However I assure you that was not my intent. I sincerely apologize to Tiger and anyone else I have offended."

The organisers of the awards ceremony, held at the players' hotel, had declared the occasion "private" and "off the record" but when the guests spilled out of the venue they could talk of little else. "I have never seen so many jaws drop in one room at the same time," said one caddie who was present. "I was standing next to a European Tour official and he said to me 'thank God he [Williams] is not on our tour'."

Williams and Woods split acrimoniously in June, with each offering different versions of what happened between them. The caddie claimed he was fired because he had taken temporary work with Scott while awaiting Woods's return from injury. The golfer, meanwhile, suggested in the time-honoured way of these things that it was simply "time for a change". They even disagreed over how the sacking was made. By phone, according to the caddie – face-to-face, said Woods.

Williams has earned a reputation for his forthright views, apparently unconcerned about what he says and whom he offends. Two years ago, he used the platform of a charity event in New Zealand to describe Woods's long-time rival Phil Mickelson as a "prick" – a comment for which both caddie and his then boss were forced to apologise. The former world No1 resisted calls to fire Williams and described him as a loyal friend.

But these latest remarks are of an altogether different order, raising as they do the spectre of race. The topic has dominated English football in recent days, with Chelsea's John Terry being accused of racially abusing QPR's Anton Ferdinand – a charge he categorically denies. Now it is golf's turn to face a similar examination.

Most immediately, there is the question of Williams's continued employment with Scott, who will presumably come under pressure to take some kind of action.

Tournament officials may also come under pressure from the HSBC Bank, which is sponsoring the Champions tournament to the tune of an estimated $10m (£6.2m). Williams's continued presence at the Sheshan International Golf Club over the weekend may well be judged to be an unacceptable diversion from what is after all a world golf championship, one of the biggest events on the golfing calendar. Over the longer term, the European Tour has the power to take sanctions against any participant in its events, player or caddie, who is adjudged to have damaged the tour's reputation.

Attention will also focus on golf's apparent inability to crack the racial divide, despite hopes that Woods's arrival on the professional scene at the end of 1996 would herald the beginning of an era in the game in which minorities would embrace what had until then been a largely white sport. Instead, the the PGA Tour has shown no significant increase in the number of black golfers. Indeed, at times over the past 15 years there have been fewer minority golfers playing at the highest level of the sport than when Woods turned professional.