The Levelling Up Secretary apologised over the footage of an event at Conservative Party headquarters said to have taken place on December 14 2020 when indoor socialising was banned.
Mr Gove said the former prime minister has a right to hand out resignation appointments which should not be blocked.
The video of the party, which was attended by failed London mayoral candidate Shaun Bailey and Tory aide Ben Mallett – who will receive a peerage and an OBE respectively – has reignited criticism of Mr Johnson’s list.
Mr Bailey reportedly left the event before the video was taken and has previously apologised for his involvement.
Asked whether the pair should be blocked from receiving honours, Mr Gove told the BBC’s Sunday with Laura Kuenssberg show: “No, I don’t think that and I have to explain the context for that, so I hope that you and viewers will allow me to do so.
“The decision to confer honours on people was one that was made by Boris Johnson as an outgoing prime minister. Outgoing prime ministers have that right.
“Whether or not they should is a matter of legitimate public debate, but they do at the moment.”
He added: “I just want to apologise to everyone really, who, looking at that image, will think ‘Well, these are people who were flouting the rules that were put in place to protect us all’.”
In the footage, one attendee can be heard joking about Covid restrictions, saying: “As long as we don’t stream that we’re, like, bending the rules” before laughing while a man and woman hold hands and dance.
The pair crash into a buffet table stacked with food and wine glasses at one point while other guests walk past wearing paper crowns and clutching alcoholic drinks.
CCHQ said “formal disciplinary action” was taken against four staff members, who were seconded to Mr Bailey’s mayoral campaign, over the “unauthorised” event.
Mr Gove told Sky’s Sophy Ridge on Sunday show: “It’s terrible. I think it’s completely out of order. As I understand it, this was an event that was organised by the people who were running the mayoral campaign for Shaun Bailey.
“They had obviously behaved in a way which is unacceptable.”
Deputy Labour leader Angela Rayner said the footage shows Tories “openly mocked the rules the British people followed” while Liberal Democrat deputy leader Daisy Cooper said it should make ministers “sick to their stomachs”.
“Revellers at this lockdown Tory booze-up openly mocked the rules the British people followed. The Tories think it’s one rule for them and one rule for everyone else,” Ms Rayner said.
“Instead of forcing them to face the consequences, Rishi Sunak has caved into Boris Johnson’s demands and chosen to reward them with honours. It’s a sickening insult.
“This Prime Minister is failing to deliver the integrity he promised and showing he’s too weak to turn the page on 13 years of Tory scandal.”
Ms Cooper said: “Conservative MPs and ministers should be sick to their stomachs seeing this new partygate footage.
“While families grieved and NHS staff worked on the front line, Conservative campaign headquarters partied.
“What’s worse is the current Prime Minister granted Boris Johnson’s request to give some of these people honours.
“There are thousands of families out there who deserve an apology for this scandal – Rishi Sunak should give them one immediately.”
Following Mr Gove’s apology, the Lib Dems added: “Gove’s apology is too little too late, it will bring cold comfort to the millions of people who stuck by the rules in the darkest days of the pandemic … Those honours should all be removed, the Government can do that.”
A Conservative Party spokesman said: “Senior CCHQ staff became aware of an unauthorised social gathering in the basement of Matthew Parker Street organised by the Bailey campaign on the evening of December 14 2020.
“Formal disciplinary action was taken against the four CCHQ staff who were seconded to the Bailey campaign.”
