A statement from St James’s Palace said he used the word three years ago as a nickname for a friend and without any malice.

The 24-year-old Prince was caught on video using the term about an Asian colleague in the Army.

The Prince, who is third in line to the throne, called the soldier “our little Paki friend”.

The trainee officer – identified as Ahmed Raza Khan – was said to be unaware of the racist comment as officer cadets made the recording.

A man claiming to be the uncle of Khan said he “expected better” from the Royal Family.

Iftakhar Raja told the BBC Harry’s comment aimed at his nephew was “definitely derogatory” and “insulting”.

Mr Raja, from Croydon, south London, said: “At no time (Khan) told us that he was called Paki or he was a good friend of Prince Harry, I mean, although they served together, that is true.

“I am proud to be British and if someone called me Pakistani I would be proud to be called that, but Paki is definitely a derogatory remark and it’s (insulting).”

The video shows the Prince when he was on manoeuvres while still an officer cadet at Sandhurst military academy.

Prince Harry and the other cadets were on their way to exercises in Cyprus when he made the racist comment during filming in the airport departure lounge, it was reported.

A spokesman for St James’s Palace said: “Prince Harry fully understands how offensive this term can be, and is extremely sorry for any offence his words might cause.

“However, on this occasion three years ago, Prince Harry used the term without any malice and as a nickname about a highly popular member of his platoon.

“There is no question that Prince Harry was in any way seeking to insult his friend.”

In 2005, the Prince caused controversy when he attended a friend’s fancy dress birthday party wearing a swastika armband.

Clarence House quickly issued a fulsome statement saying the young prince was sorry if he had caused any offence.

In recent years Harry has worked hard to shake off a reputation as a playboy prince earned from his regular appearances on the London nightclub scene.

In the past he has given his critics plenty of ammunition, from smoking cannabis as a teenager to a nightclub scuffle with a paparazzi photographer. 

The Queen awards the 'Sword of Honour' to the Pakistani Officer Cadet Ahmed Raza Khan, the subject of Prince Harry's controversial remarks