Reports in France have suggested it was the reference to the Algerian-born star’s mother which made him blow his top.
His mother Malika had been taken to hospital seriously ill only hours before Sunday’s final.
Zidane’s agent Alain Miglaccio said the player had told him a ‘very serious’ comment had been made during the match.
Italian news agency Ansa quoted Materazzi as saying: "It is absolutely not true, I did not call him a terrorist.
"I’m ignorant. I don’t even know what the word means."
Italy won the match 5-3 on penalties, with Zidane missing the shoot-out in his final match before retirement.