Morrissey's legal representatives gave the IPC Media-owned title until 1pm yesterday to make a public apology for publishing its lead article, which features the "Big Mouth Strikes Again", and the weekly music magazine has now admitted it is now facing legal proceedings over allegations that its story is defamatory.
In a statement IPC confirmed it had been contacted by Morrissey's legal team: "We can confirm that Morrissey's legal representatives have contacted NME, and pending the outcome of these discussions we won't be commenting further."
While the magazine has not used the term "racist" in its editorial, the Manchester singer's management claim the published article is a "character assassination" and that it was not a fair and balanced piece of work.
Morrissey's management have said the article's "inflammatory nature...can only be intended to create controversy to boost [NME's] circulation at the expense of Morrissey's integrity".
In the article, Morrissey, who has lived away from the UK for the past 10 years and is currently living in Los Angeles and Rome, makes a series of statements about UK immigration, including that England had "lost its identity" and that "the floodgates had opened".
Morrissey, who has had a fractious relationship with the weekly music title since his career began in the early 1980s, is quoted in the article as saying: "With the issue of immigration, it's very difficult because although I don't have anything against people from other countries, the higher the influx into England the more the identity disappears.
"Other countries have held on to their basic identity, yet it seems to me that England has thrown it away...England is a memory now. Other countries have held on to their basic identity, yet it seems to me England was thrown away."
The singer goes on to say that he found all racism "very silly", while in a now widely published email exchange between NME editor Conor McNicholas and the singer's representative Merck Mercuriada, McNicholas said NME "would be mad" to accuse Morrissey of racism, but that his comments were "unhelpful at a time of great tensions."
It is understood that the journalist who conducted the interview with Morrissey, Tim Jonze, asked the NME to remove his byline from the story after claims it had been drastically rewritten. Jonze said: "I had a read and virtually none of it is my words or beliefs so I've asked for my name to be taken off it."
However, Jonze has since told the BBC that he found the singer's comments were offensive.
The NME has ran the article under the confusing banner, "interview Tim Jonze", "words NME".
It is not the first time Morrissey has courted controversy over allegations of racism in his music and in interviews.
In 1992 the NME published a front page article showing Morrissey draped in a Union Jack at a gig that was attended by National Front supporters under the headline: "Flying the flag or flirting with disaster?"
Meanwhile, the singer's ambiguous attitude to race relations in songs such as 'The National Front Disco' and 'Bengali In Platforms' have attracted criticism in the press.
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