In the clip, Fox, now 34, recalls working as an extra on "Bad Boys II," directed by Bay, now 55.
The actress said that at just 15 years old, she was dressed in a bikini and heels but could not sit at a bar due to her age.
"[Bay's] solution to that problem was to then have me dancing under a waterfall getting soaking wet," said Fox to laughs from the crowd. "At 15, I was in 10th grade. That's sort of a microcosm of how Bay's mind works."
Kimmel responded: "Well that's really a microcosm of how all our minds work, but some of us have the decency to repress those thoughts and pretend that they don't exist."
Both the comedian and Bay were skewered on social media.
"Michael Bay has always been so up himself, this doesn't surprise me at all. It's totally unacceptable, the response was totally unacceptable and the fact nothing has been done about it is totally unacceptable," said one person.
Wrote another person: "This is disgusting. Why hasn't @jimmykimmel or @michaelbay been called out on this atrocious behaviour before? How does all of this start to surface now, years later, when it should've been dealt with then and there?"
"What an utterly disgusting take by Kimmel. Why is, 'I'm so sorry that happened to you', something that is beyond his imagination to say," wrote one user. "Instead he offers, 'We all have those thoughts, but we repress them'. God damn, she was 15. Who the Hell is 'We'?"
"His response is even worse what the hell," said another of Kimmel.
A third added: "[He] basically said, 'we all have thoughts sexualizing minors but we keep quiet about it bc we are good guys' i knew there was a reason i always instinctively disliked jimmy kimmel."
In the interview, Fox presented Kimmel with a sketch of the comic with exaggerated muscles and Kimmel returned the favor, showing off a drawing of himself and Fox "together" in bed, seemingly making out.
Reps for Kimmel, ABC and Bay did not immediately respond to Fox News' request for comment on the matter.
The backlash comes as Kimmel fights off several other accusations of inappropriate behavior throughout his career.
Kimmel recently owned up to having "white privilege" during a segment on his show but neglected to address his use of blackface during his days hosting "The Man Show" in the early 2000s, in which he would darken his skin while impersonating celebrities like Oprah Winfrey.
In the comments of a video depicting such impersonations, Kimmel and Jimmy Fallon -- who also wore blackface while imitating Chris Rock in the video -- were deemed "racist."
Fox News has also obtained audio of Kimmel admitting years ago that he imitated rapper Snoop Dogg's voice for a track in a 1996 Christmas album -- an original song in which Kimmel used the "N-word" several times.
In the same podcast, Kimmel also imitated black comedian George Wallace, using a voice that podcast host Adam Carolla called Kimmel's "crazy black voice."
In the Christmas track, a singer mentioned a "fat n---- in a sleigh giving sh--- away," referring to Santa Claus. The song also referenced "n----- in the manger," including associates of King Herod.
"I told that motherf---er Santa, bring a pick for my afro," the singer went on. The "three wise men" were described as "bringing gifts and sh-- for baby boo in the hay."
"Me and my n----- down in LBC, we'll smoke that motherf------ Christmas tree," Kimmel said.
Kimmel's track was recorded when Snoop Dogg was rising in popularity, Kimmel said in the podcast.
"Jimmy, do you only do black people?" someone asks in the audio.
"I prefer them, yes," Kimmel responds, apparently jokingly.
Just last week, Kimmel announced that he'd be taking a hiatus from hosting his show for the course of the summer.
“There’s nothing wrong me, my family is healthy, I’m healthy. I just need a couple of months off," he explained. "So, while I’m gone, a cavalcade of very kind and capable people will be filling in for me. I think you’re going to be very happy with them. They will be guest hosting the show.“
Kimmel is currently slated to host the Emmy Awards later this year.
Fox News' Brian Flood and Gregg Re contributed to this report.