A benefits form which grouped Gypsies, travellers and the Cornish together is being withdrawn after complaints.
The tick box for ethnic backgrounds was included in a Cornwall Council housing form.
Liberal Democrat group deputy leader Alex Folkes said: "Being a gypsy and traveller or being Cornish are two different things."
Cornwall Council said it was "inappropriate wording" and a "genuine error" which had been rectified.
Mr Folkes wrote in his blog: "Some people will suggest it is offensive. And they are right. Not because being likened to a gypsy or traveller is an insult. It isn't.
"But because the two backgrounds are so entirely different.
"What Cornwall Council has done in designing this form is to create a 'bucket' category for anyone who doesn't appear to fit into 'normal' definitions.
"It's offensive to Cornish people and offensive to gypsies and travellers."
'Proud of culture'
Councillor Dick Cole, leader of Cornish nationalists Mebyon Kernow, called it "madness".
He said: "The whole point is to make people's identities clear, so if you amalgamate it, what's the point?"
Cornwall Council said in a statement: "We would like to thank the individual who has pointed out the inappropriate wording on this form and apologise unreservedly for any offence this may have caused.
"We are already in the process of updating the form as part of the welfare reform changes.
"In the meantime, we will ensure that any remaining forms in circulation will be manually amended.
"We are very proud of our culture and heritage and are committed to promoting the Cornish identity as well as celebrating the diverse cultures which make up our communities."
Maggie Smith-Bendall of the The National Federation of Gypsy Liaison Groups said identifying Gypsies and travellers separately was a help to the community in the provision of council services.
"The mistake was that they did not have an additional box.
"I think someone was rushing the job."