In a since-deleted photo shared on Instagram, the American television host was seen wearing ripped jeans and make-up that gave the illusion of dirt on her face.
She also held up a sign that read: "I am hungry help me."
"My QVC candles are perfect for Halloween!!!" the multimillionaire businesswoman captioned the post.
After the costume sparked considerable backlash online, the 85-year-old said she was distressed that her costume had offended people.
Sharing a statement on Instagram, Stewart apologised for her "insensitive" costume.
"It's hard to admit when you've really screwed up. My earlier statement didn't go far enough," she wrote.
"I know many people are economically struggling. Wearing a costume like I did was insensitive and not funny. I'm very sorry."
A few hours earlier, the American lifestyle icon said in a statement to Page Six that her costume was "intended to bring more awareness to the very serious subject of homelessness".
"I am distressed that my Halloween costume yesterday, which was intended to bring more awareness to the very serious subject of homelessness, has offended people, which was never my intention.
"Homelessness continues to remain one of America's greatest challenges and ongoing crises, something that I care deeply about, and I have spent a significant amount of time and effort supporting charities that combat this ongoing social epidemic. I am committed to continuing to make a difference."
The Emmy Award winner founded her highly successful Martha Stewart Living magazine in 1990, which led to the launch of her eponymous lifestyle TV show, establishing her as a household name in the US.
She has written more than 100 books and opened multiple restaurants during her decades in the spotlight.
In 2004 she was sentenced to five months in prison after she was found guilty of lying about the nature of a stock sale three years prior.
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