Nadella was speaking during an on-stage discussion at the Grace Hopper Celebration of Women in Computing conference in Arizona, when he made the remarks.
Asked about advice for women interested in advancing careers but uncomfortable asking for pay increases, Nadella was quoted as responding they should just trust "that the system will actually give you the right raises as you go along."
He reportedly went on to contend that women who don't ask for pay raises have a "superpower" in the form of "good karma, that'll come back."
Moderator Maria Klawe, a college president and a member of Microsoft's board of directors, pointedly disagreed with Nadella, triggering applause from the audience.
Studies have consistently shown women get paid less than men doing the same jobs. Klawe advised women listening to "do your homework" to make sure their pay is on par with that of male counterparts.
Nadella later scrambled to damp down the controversy in a response on Twitter.
"Was inarticulate re how women should ask for a raise," Nadella said in a message fired off at his @satyanadella Twitter account. "Our industry must close gender pay gap so a raise is not needed because of a bias."
Nadella also reportedly sent a memo to Microsoft employees apologizing for suggesting women rely on good karma instead of asking for raises, saying his reply to the question earlier was "completely wrong."