MacKay issued a statement in response to a video made in 2010 that features an unidentified military member stationed at 14 Wing Greenwood wearing a fake beard and turban, boasting that he worked with the leader of al-Qaida.
The CBC says it was leaked a copy of the video, which shows the officer calling a woman a "silly infidel," saying he drives a taxi and then later yelling at someone off-screen to get away from his car bomb.
MacKay said an investigation into what happened was launched as soon as the Defence Department became aware of the video's existence.
"Two years ago, certain members of the Canadian Forces stationed at CFB Greenwood filmed a video intended for their colleagues that featured inappropriate content and poor taste," MacKay said.
"Religious and cultural tolerance are important and necessary components of any national and professional institution, including the Canadian Forces, and I know the contents of this video do not represent the wider military community and its leadership."
Capt. John Pulchny, a spokesman at 14 Wing Greenwood, said the Canadian Forces National Investigation Service is trying to determine who made the video and whether any military rules were broken.
Pulchny said at least one officer in the Royal Canadian Air Force was involved in the production of the video, which was shown at a formal dinner at the Nova Scotia airbase.
He said the video was ordered destroyed, and investigators may look into how copies of it survived.
Lt.-Gen. Yvan Blondin, the chief of the Royal Canadian Air Force, said he couldn't comment on the details of what happened as the investigation is ongoing, but offered an apology to anyone who may have been offended.
"We have zero tolerance for acts that do not reflect our Canadian values, especially the respect we owe to other cultures and religions," Blondin said in a statement.
"I express my apologies to those who may feel offended, and reaffirm my commitment to take any possible administrative, disciplinary or corrective actions that may be warranted."