The US comedian hosted the 2023 Academy Awards ceremony where An Irish Goodbye won best live action short film and several Irish actors including Colin Farrell, Paul Mescal and Brendan Gleeson were nominated.
Neeson, 70, said: "I heard he was being a bit racist. Jokes about Irish fighting, drinking and all that. I don’t know what to say.”
Watch: Jimmy Kimmel's Irish joke in his Oscars opening monologue
During his opening monologue at the Oscars ceremony, Kimmel said: "It's been some year for diversity and inclusion. We have nominees from every corner of Dublin. Five Irish actors are nominated tonight, which means the odds of another fight on stage just went way up."
The screen cut to The Banshees of Inisherin stars Farrell and Gleeson who brandished their fists jokingly at the cameras.
Farrell, Gleeson and Barry Keoghan, were born in Dublin but co-star Kerry Condon is from Tipperary and Aftersun star Mescal is from County Kildare.
Later Kimmel cut short Irish animator Richie Baneham during his acceptance speech for the best visual effects Oscar for Avatar: The Way of Water to make a joke about the Irish accent being hard to understand.
Kimmel told Irish actor Farrell he had a letter 'from a fan' asking what he was saying during The Banshees of Inisherin.
Farrell hit back: “I’d like him to go on YouTube and check out the SNL skit from last night.”
He was referring to a Saturday Night Live sketch that had depicted Farrell and co-star Gleeson's accents as unintelligible with an SNL host exclaiming: “Wow! They haven’t even started drinking yet.”
Viewers of the Oscars had expressed their displeasure on social media about the offensive stereotyping of Irish people by Kimmel.
One said: "Jimmy Kimmel… unfunny and anti-Irish. Not sure which is worse."
Another tweeted: "That Irish actors joke was so unnecessary, ready for Jimmy Kimmel to not host next year!"
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And another commented: "The anti-Irish sentiment from Jimmy Kimmel… we’re really doing this in 2023 huh."