He said those who utter such remarks intentionally say so to hurt the feelings of the Chinese community and that his administration does not share such views.
"I hope we are not too hurt by one or two comments, in every community, there are always one or two individuals whose head are not quite right." he told a dialogue with some 2,000 Chinese youths at Universiti Malaya this afternoon.
Najib was responding to a question from the floor which queried what was the government's course of action against those who labelled the Chinese community as "pendatang".
"Even in an advanced nation like the US, you have a preacher from a small chapel in Florida who wanted to burn the Quaran, that's a nut case," he said.
The premier adds that his administration fully recognises the Chinese community as full fledge citizens of the country.
"If there are one or two lunatics, don't take it personally, what is important is that the government does not consider Malaysian Chinese as pendatang, you are a citizen with full rights.
"So, don't make an issue out of a few people with loose screws," he said, stopping short of promising taking action against those who cross the line.
In recent years, there have been a number of high profile cases in which civil servants and Umno politicians making racial slurs in public against non-Malays.
In 2008, Penang Umno politician Ahmad Ismail was suspended from the party for uttering the “pendatang” phrase during the Permatang Pauh by-election campaign.
No criminal action was taken against him, but a journalist was arrested under the Internal Security Act (ISA) for reporting his speech.
Defence Minister Ahmad Zahid Hamidi had also ruffled feathers in 2010 when he told Parliament that Chinese and Indians were “not patriotic enough”, to explain their low numbers in the armed forces.
The same year, there were two teachers were accused of making racial slurs at their non-Malay students, causing an uproar.
Najib also added that the country should leverage on the diversity of its people including its languages, instead of viewing the differences as a zero sum game.
Asked what would the government do about Chinese representation should MCA lose badly in the next general election, Najib replied: "That's an academic question but we don't intend to lose.
"We want our partners to win and we will work hard to make sure MCA will win and hopefully we can have a strong government where leaders from all communities are represented.
"So if you want your views of the Chinese community to be heard by the government, my advice to you is please support MCA candidates."
The premier added that MCA was doing its best to reach out to the Chinese community and assured that there were "lively discussions" in the cabinet on how to resolve its concerns.
On the possibly of PAS joining the federal government should it win significantly in the next general election, Najib insisted that BN will form the government while PAS will remain with Pakatan.
"We are a pre-election coalition. At the moment PAS prefers to be on the other side - which is a very confused side," he said.
Najib added at the gathering which was organised by the Eight Major Chinese Youth Organisation (Emco), that the youth should be more discerning about information on the Internet, pointing out that a "ghost" was being created out of the Lynas issue.
"Please don't work on emotions - like being afraid of ghosts. We are fond of creating ghosts and then we become emotional," he said.
The premier also announced that the government is working with MCA to set up a RM30 million business loan fund to be set up soon.
"RM15 million will come from the 1MDB foundation while another RM15 million will come from MCA's (education loan coperative) Kojadi, but disbursements will be handled by Kojadi," he said.