A fake suicide bomber was allowed to shout "Allahu Akbar"- a religious phrase meaning "God is great" during a staged terrorist attack at one of the UK's largest shopping centres.
Greater Manchester Police (GMP) apologised following criticism, adding that it had been "unacceptable" to use the Islamic phrase immediately before the mock suicide bombing at Manchester's Trafford Centre.
Greater Manchester's Mayor and Police and Crime Commissioner Tony Lloyd said the operation had been "marred" by the "ill-judged, unnecessary and unacceptable decision by organisers to have those playing the parts of terrorists to shout 'Allahu Akbar' before setting off their fake bombs".
The exercise, which police wanted to make as realistic as possible, involved anti-terror police armed with machine guns testing their response to a Paris or Brussels-type attack on civilians at the huge shopping centre overnight.
Lloyd said it had been a "very good" exercise in preparing the region for such a situation, but concerns had been raised about the use of the language.
He added of the choice of words: "It didn't add anything to the event, but has the potential to undermine the great community relations we have in Greater Manchester."
GMP Assistant Chief Constable Garry Shewan said the operation had been based on an attack by an extremist Daesh-style organisation, but issued a statement apologising for any offence caused.
He said: "On reflection we acknowledge that it was unacceptable to use this religious phrase immediately before the mock suicide bombing, which so vocally linked this exercise with Islam. We recognise and apologise for the offence that this has caused."
Officers from the North West Counter Terrorism Unit had drilled their training techniques and counter-terror tactics in the role-play exercise which involved around 800 people, including volunteers and fire and ambulance service personnel.
The drill, which saw different scenarios play out, including suicide bombers, hostage-taking and mass casualties, was to test how the emergency services respond to "fluid" and developing terrorist attack situations.
The exercise took place between midnight and 6am while the shopping centre was closed and was the fourth major exercise in months, coming after previous ones in London, Glasgow and Essex.
The current UK terror threat level is described as severe, meaning an attack is highly likely, according to the security services.
Any suspicious activity or behaviour can be reported to police via the confidential Anti-Terrorist Hotline by calling 0800 789 321. Extremist or terrorist content online can be reported at www.gov.uk/report-terrorism.