The song, shown on the country's new TVR3 channel on December 6, drew strong condemnation from religious groups and the US embassy in Bucharest. The government has also distanced itself from the controversial broadcast.
The century-old carol, performed by a folk group in the northwestern Cluj region, features lyrics that use the pejorative term "jidovi" for Jews and includes a line that says Jews are good "only in the chimney, only in smoke".
Foreign Minister Titus Corlatean vehemently objected to the song. "I strongly condemn any form of anti-Semitism, even more when it happens to be spread through a public media," he said.
The US embassy called the broadcast "an unacceptable display of anti-Semitism that must be condemned in the strongest, most unequivocal terms".
It urged all Romanians "to reject racism and to repudiate those that would defend such acts as an acceptable expression of cultural identity".
The Elie Wiesel Institute for Holocaust research in Romania expressed "strong disapproval" of the Christmas carol, which it said carried "an anti-Semitic message of rare gravity and vulgarity".
The Orthodox Church also criticised the choir's performance, saying Christmas songs "should not be used to spread hatred".
Romania's Broadcasting Council has imposed a fine of 50,000 RON (some 12,000 euros, $15,400) on the network that aired the programme.
Romania for a long time denied having participated in the mass killing and deportation of Jews during World War II.
Between 280,000 and 380,000 Romanian and Ukrainian Jews died in Romania and the territories under its control during pro-Nazi marshal Ion Antonescu's regime, according to an international historians' commission headed by Nobel Peace laureate Elie Wiesel.
The row over the song came as the ruling Social Democratic Party (PSD) angered rights groups by nominating the former vice-president of the far-right Greater Romania Party, Lucian Bolcas, to be a judge in the Constitutional Court.
The Centre for the Fight against Anti-Semitism (MCA) urged the PSD to reconsider, denouncing Bolcas's "racist and anti-Semitic ideas".