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The controversial string came to light on a mailing list for developers who oversee the core, or kernel, of Linux.
The string was used every time the Microsoft program ran a virtual version of Linux.
Kernel hacker Paolo Bonzini posted a message about the string on the Linux Kernel mailing list saying "Somone (sic) was trying to be funny, I guess".
Microsoft was alerted to the mistake and swiftly issued a statement.
"We thank the community for reporting this issue and apologise for the offensive string," it said to Network World.
It added that it had prepared a patch that would change the spelling of the string in an update.
Commenting on the gaffe, developer Dr Matthew Garrett noted that the first version of the Microsoft code used a similar string of 0x0B00B135 - a form of letters that roughly translates to "boobies".
"Puerile sniggering at breasts contributes to the continuing impression that software development is a boys' club where girls aren't welcome," Dr Garrett wrote.
His comments, and those on the Linux mailing list, have started a huge debate about whether use of the string was sexist and how male developers should conduct themselves.
On his blog, Dr Garrett also wondered how easy it would prove to change the string. Other services, such as access to Microsoft's Azure cloud service, are believed to make extensive use of it.
In early June, Microsoft suffered another embarrassment over '"vulgar" language used during a song and dance routine at a company conference.