Berlusconi was filmed speaking at a rally for his brother's right-wing People of Freedom party, where he described Balotelli as "the family's little n****" [negretto di famiglia].
Balotelli joined Milan on transfer deadline day last week in a £19m move, and scored twice on his debut against Udinese at the weekend.
"OK, we are all off to see the family's little n*****," Berlusconi told the rally. "He's a crazy head. All the young ladies are invited as well – you can even have a chance to meet the president [Silvio Berlusconi]."
Silvio, 76, is aiming to return to the office of prime minister for a fourth time in elections later this month.
He had spoken in praise of Milan forward Kevin-Prince Boateng's decision to walk off the field during a friendly match for club in January.
He was also quoted in the same month referring to Balotelli as a "rotten apple", although he subsequently backtracked on the remarks.
"What I said was based on the fact that I feel positive people are useful in the changing room,” Silvio told Sky Italia. "I was not referring to Balotelli and I apologise if it was taken as a slur against him."