The criticism emerged in a press release Mr Walsh issued about the influence of small political groups in elections in the Victorian Upper House.
Mr Walsh has posted the following statement on his website:
“In that media release, while making the point group voting tickets benefit fringe candidates with links to radical agendas, I described Farm Transparency Project (FTP) as a “known terrorist group”.
“FTP and its director Christopher Delforce have alleged that the media release defamed them and caused serious harm to their reputations, including serious financial harm to FTP, by imputing FTP are a terrorist organisation and he and Mr Delforce are terrorists and/or violent and/or criminals.
“I accept that the language I used in the media release was inappropriate. I did not intend to suggest that FTP and Mr Delforce are terrorists in the true sense of the word, in that they employ physical violence against other people to achieve their political gains.
“If anyone misunderstood me to be suggesting as much, I retract that suggestion and apologise for any hurt my use of that language may have caused,” Mr Walsh said in his statement.
Mr Walsh added that he disagreed with Farm Transparency Project’s views and actions, however he accepted they employed non violent tactics.
The FTP has secretly entered piggeries in northern Victoria to obtain photographs and videos of activities they say are evidence of cruelty.