Mohammed Shafaq, from Lidget Green, Bradford, was driving through the city on August 25 when he came to a stop at traffic lights outside the Punch Bowl pub, in Lowther Street, and was confronted by a man who was smoking outside.
The man can be heard abusing the driver on dashcam footage.
He shouts: “It’s rapist day in York” and “All these Uber drivers, must be rapist day in York.”
When Mr Shafaq responds: “What, you a rapist, yeah?
The other man shouts back: “No, no, I’m not Muslim Pakistani driver from out of York, pal.”
The 40-year-old, reported the incident to police and gave a statement.
Mr Shafaq said the officer admitted they had made a mistake in cautioning the man and a caution was not a robust punishment for a hate crime.
He said: “He apologised profusely on behalf of North Yorkshire Police and said this is not what we’re about and that he would be talking to the police officer and the sergeant who were dealing with my case.”
Mr Shafaq will now be given the chance to log a formal complaint.
Iman Atta OBE, is director of Tell MAMA, (Measuring Anti-Muslim Attacks), a national project which records and measures anti-Muslim incidents in the UK.
He said: “We are very pleased that the case is being re-opened around the anti-Muslim abuse that Mohammed Shafaq endured. He approached Tell MAMA and was unhappy that the driver received a caution and we advocated on his behalf.
“We are thankful to the Chief Inspector for sending an apology to Mr Shafaq and in reconsidering this case. “Clearly, the police have listened and they have sent out a strong message that anti-Muslim hate or any kind of hatred is not acceptable.”
A North Yorkshire Police spokesperson said: “We fully understand the seriousness of the incident involving Mr Shafaq. The officer who issued the caution to the offender did so with the utmost integrity and in the belief that this was the most appropriate outcome.
“However, an alternative course of action had unfortunately been missed and the relevant learning has now been received by all those involved in the case.
"Mr Shafaq will be invited to make a formal complaint regarding this matter."
A petition calling for Erewash cabbies to be allowed to have fully-tinted windows in their taxis has been rejected over fears that vehicles could be used to enable the abuse of vulnerable children and adults.