The video, which was produced in 1986 and released Thursday night, begins with a message saying it was a "skit created in a misguided attempt at humor."
In it, assistant police chief Jim Pugel and other officers sing a parody song to the tune of "Under the Boardwalk," by the Drifters.
The song includes lyrics about homeless people sleeping on the dirt and drinking all day, including the line, "Under the viaduct down by the bay, we'll be drinking our T-Bird all through the day."
The video also shows homeless people fighting with police and using drugs.
The department claims the video was supposed to be a joke to go along with an internal training video.
In a Thursday night press conference to address the video, Pugel said then-police chief Patrick Fitzsimons saw the skit and reprimanded the officers involved. He also ordered all copies of the video destroyed, but one copy remained in the department.
"I regret my participation and have professionally apologized for my role in it. I do so now publicly. I am truly sorry. Even by 1980s standards, the Seattle Police Department considered the video to be insensitive and inappropriate," Pugel said in a written statement.
Pugel said he was not asked to release the video, but did so to "show where this department has been and where it is going."
He said he released a department-wide statement Thursday afternoon to apologize to his fellow officers, and he had already spoken with the leaders of several organizations that work with the homeless to express remorse about the video.
Pugel is a Seattle native and an officer for more than 30 years. He was named interim chief earlier this month when chief John Diaz announced his retirement from the department.