The brand announced through its Twitter-like Weibo account that it had made a mistake and as of July 24 had stopped selling and destroyed the T-shirts.
China has pressured global airlines and other companies to describe the city as "Hong Kong, China" on their websites, rather than just as "Hong Kong".
The T-shirt, images of which were posted on Chinese social media, featured a list of "city-country" pairs, including "New York-USA" and 'Beijing-China'.
"We apologise for the dispute".
The company, and designer Donatella Versace, have both since apologized for the "unfortunate" error.
But when it came to Hong Kong and Macau, the place names appeared in the following duos: "Hong Kong-Hong Kong and Macau-Macau" - the wording instantly triggered a storm of rage online.
"Never have I wanted to disrespect China's National Sovereignty and this is why I wanted to personally apologise for such inaccuracy and for any distress that it might have caused", she said on her Instagram account.
"The motherland's sovereignty and territorial integrity are sacred and inviolable", the studio's statement read in part.
Versace's T-shirt is the latest in a string of faux pas by foreign companies when it comes to dealing with China.
Last year, United States retailer Gap has apologised for selling T-shirts which it said showed an "incorrect map" of China.
The issue has gained further prominence in light of months of pro-democracy demonstrations in Hong Kong.
Beijing also ordered dozens of global air carriers to change their websites to ensure Taiwan was listed as part of China - a decision that the White House described as "Orwellian nonsense". Beijing considers self-ruling Taiwan to be a breakaway province.
Versace joins the ranks of other prominent global companies including Zara and Gap, that also issued apologies to China following similar misrepresentation controversies.
Both Hong Kong and Macao are former European colonies that were returned to China in the late 1990s.