The prime minister - who calls the group 'ISIL' - said Muslims would 'recoil' at the phrase being used to justify the 'perversion of a great religion'.
Speaking about the attack in Sousse, Tunisia where at least 15 Britons were killed by two gunmen linked to the militant group, Cameron insisted that the battle against extremists targeting Britons around the world can be won but will require 'extraordinary resolve and patience'.
He criticised BBC presenter John Humphrys for referring to the group as Islamic State.
The extremists are variously known as Islamic State, Islamic State of Iraq and Syria (ISIS), Islamic State of Iraq and the Levant (ISIL) and Da'esh, based on the Arabic name.
During his interview on BBC Radio 4's Today programme Cameron only referred to the group as 'ISIL'.
"I wish the BBC would stop calling it Islamic State because it's not an Islamic State; what it is an appalling, barbarous regime," Cameron said.
"It is a perversion of the religion of Islam and many Muslims listening to this programme will recoil every time they hear the words 'Islamic State'."
However, some people on social media pointed out that ISIL is an acronym which refers to 'Islamic State'.
In the Commons on Monday, SNP Westminster leader Angus Robertson backed the call for politicians and the media to stop using 'Islamic State', and said 'Daesh' should be used instead.
He urged the Prime Minister join MPs across all parties, US Secretary of State John Kerry and the French foreign minister Laurent Fabius in 'using the appropriate term'.
Robertson added, "The time has come in the English speaking world, to stop using Islamic State, ISIS or ISIL, and instead we and our media should use Daesh as the commonly-used phrase across the Middle East."
The British premier repeated his criticism of the BBC for referring to the group as Islamic State: "I think this is particularly offensive to many Muslims who see, as I see, not state but a barbaric regime of terrorism and oppression that takes delight in murder and oppressing women and murdering people because they are gay."
"I personally think that using the term ISIL or 'so-called' would be better than what they currently do.
"I don't think we will move them all the way to Daesh so I think saying ISIL is better than using Islamic State because it is in my view neither Islamic nor a state."
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