In a statement issued in NY, the group of over 50 nations said: "the AU expressed its disappointment and outrage over the unfortunate comment made by Mr. Donald Trump, President of the United States of America".
Mr Trump said on Friday that he was only expressing what many people think but won't say about immigrants from economically depressed countries, said the source.
"There is a serious need for dialogue between the US Administration and the African countries".
Many of those troops are based at a USA base in the East African country of Djibouti.
On Monday, the department took that same action against immigrants from El Salvador, another country reportedly mentioned at an immigration meeting Thursday.
Botswana summoned the U.S. ambassador to the country to "clarify if Botswana is regarded as a "s***hole" country", according to a foreign ministry statement calling Mr Trump's comments "irresponsible, reprehensible and racist".
The group, which represents the 55 countries on the African continent, said that Trump's remarks "dishonor the celebrated American creed and respect for diversity and human dignity", and that the administration has a "huge misunderstanding" of the continent. After an emergency meeting today at UN, Africa group says it "is extremely appalled at...outrageous and xenophobic remarks" attributed to Trump and "demands a retraction and an apology".
"The Government of Botswana is wondering why President Trump, must use this descriptor and derogatory word, when talking about countries with whom the USA has had cordial and mutually beneficial bilateral relations for so many years", said the statement.
He tweeted: "God made me African". We are certainly not a "shithole country".
"I am an African and very proud of my continent".
In South Africa, the ruling African National Congress party declared "ours is not a s***hole country" and described Mr Trump as "extremely offensive".
"It is thanks to our African leaders that we are insulted that way", she said.
Condemning the comments "in the strongest terms", the AU demanded "a retraction of the comment as well as an apology, not only to the Africans, but to all people of African descent around the globe".
Mr. Trump's comment has triggered widespread condemnation.
"He didn't just name a white country, he named the whitest - so white they wear moon-screen", he said.
The US Embassy in Accra, Ghana also took to twitter to reaffirm America's reverence for Africans.