The Manchester United player dressed in an army-style vest with bottles of Jagermeister liquor and Red Bull energy drink strapped to his chest in a word play on the drink "Jagerbomb."
To complete the look, he also wore a fake circuit board with wires attached to his chest and an Arab-inspired head dress, Britain's the Mirror reported Friday.
His costume prompted negative reaction, including from Graham Foulkes, whose son died in the London suicide bombings July 7, 2005.
Foulkes told the Sun the costume was "one of the most offensive things I have seen."
A statement on behalf of Smalling from the Wasserman Media Group said the party was held to celebrate Christmas in the privacy of Smalling's home.
"Although he fully accepts in hindsight it was an ill-thought out and insensitive decision, absolutely no harm was intended whatsoever and he apologizes for any offense caused," the statement said.