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UPDATE 1-VW CEO says stunned by 'repulsive' diesel fume tests

* CEO apologises for misconduct of people involved

* Calls exhaust tests "unethical and repulsive"

* Admits VW still has long way to go to regain trust (Adds more comments from CEO and background)

FRANKFURT/BERLIN, Jan 30 (Reuters) - Volkswagen's CEO said he was "stunned" by reports the carmaker had sponsored tests that exposed monkeys and humans to toxic diesel fumes and, two years after an emissions cheating scandal, pledged once again to get to the bottom of the wrongdoing.

Europe's largest automaker has come under fresh scrutiny after the New York Times said last week that Volkswagen and German peers BMW and Daimler funded an organisation called European Research Group on Environment and Health in the Transport Sector (EUGT) to commission the tests.

The report came more than two years after Volkswagen (VW) admitted to cheating U.S. diesel emissions tests, sparking the biggest business crisis in its history, and pledged sweeping changes to ensure such misconduct never happened again.

"Over the weekend we had to learn once more that there is still a long way ahead of us to regain lost trust," VW CEO Matthias Mueller said at a reception in Brussels late on Monday, in his first public remarks on the tests.

"The methods used by EUGT in the United States were wrong, they were unethical and repulsive," he said. "I am sorry that Volkswagen was involved in the matter as one of the sponsors of EUGT."

The study, conducted in 2014, was designed to defend diesel following revelations that the fuel's exhaust fumes were carcinogenic, the New York Times reported.

Reuters could not confirm the details and purpose of the study and EUGT, which was dissolved last year, could not be reached for comment.

BMW and Daimler have also denounced the tests.

Mueller, a company veteran who become CEO after the emissions test cheating scandal broke in September 2015, has complained on several occasions that tackling VW's closed-off corporate culture was proving tougher than expected.

He said the New York Times report showed VW had to raise its game in improving ethical standards, and pledged to take the necessary action once it had finished investigating EUGT's work.

"We must live and deal with setbacks," he said.

VW said on Monday the EUGT study was never discussed in any management board meetings, after the Bild newspaper earlier reported an internal e-mail showed at least some senior managers were informed about the design of the research.

The study risks dealing another blow to diesel technology, in which the German auto industry has invested heavily.

Mueller and CEOs from German manufacturers and suppliers including Daimler and Continental will on Tuesday discuss ways of trying to regain the initiative after the fume test revelations, two auto industry sources told Reuters.

Executives are expected to meet in Berlin on Tuesday to elect the new head of Germany's VDA car industry lobby.

German autos supplier Robert Bosch said on Tuesday the revelations were damaging for the entire industry and that a decline in demand for diesel could pose a threat to jobs.

"Bosch had nothing to do with the animal experiments. I am as appalled as you all are," CEO Volkmar Denner said.

Separately, the VDA said on Tuesday carmakers were in talks with cities including Berlin and Hamburg about ways to speed up and expand steps to tackle pollution from diesel vehicles in a bid to avoid possible bans.

German Environment Minister Barbara Hendricks is meeting with European peers in Brussels to discuss government measures designed to improve air quality in badly polluted cities. (Reporting by Maria Sheahan and Andreas Cremer; Editing by Louise Heavens and Mark Potter)