The sign - on the Beeston-bound platform of the Queen's Medical Centre stop - points commuters towards the "Univeristy Of Nottingham".
The error could have been there for "seven to eight months", it is estimated.
A Nottingham Express Transport (NET) spokesman said they will now be looking to replace the sign next week.
People were quick to condemn the "unfortunate error", captured by a BBC journalist.
It follows another spelling mishap spotted on a sign last July on the network, which stated "Chillwell Road" rather than Chilwell Road.
"Absolute joke - what is happening with the world," Melanie Winskill wrote on BBC Radio Nottingham's Facebook page.
Gill Bennett pondered: "Maybe the people responsible didn't go to university."
A NET spokesman said it is unsure how long the error has existed at the stop, but added it "could have been there for seven to eight months".
"Clearly this is an unfortunate error made during the production of the sign," the spokesman said.
"We will be looking to replace it as soon as possible next week now it has been pointed out."

The law also permits 12-year-olds to be contracted to work for others. But they need parental authorisation.
Vice-President Alvaro Garcia Linera said the new legislation reflects the needs of Bolivia, one of the poorest countries in South America.
It also sets harsher punishment for violence against children.
The law sets a sentence of 30 years in jail for child homicide.
The measure, approved by Congress earlier this month, was signed into law by Mr Garcia in the absence of President Evo Morales, who was travelling to Brazil.
"President Evo [Morales] intervened to make sure we found a balance between the reality and the law, between rights and international treaties," added Mr Garcia.
More than 500,000 children already work to supplement the family income in Bolivia according to the United Nations Children's Fund (Unicef).
Many work cleaning shoes and selling food in stalls in La Paz and other Bolivian cities. But others face extreme conditions in mines and in agriculture fields.
Mr Morales's socialist government hopes the law will help eradicate extreme poverty in Bolivia.
The International Labour Organisation says children under the age of 15 should not be allowed to work.
But it allows a minimum working age of 14 for developing countries.
"It would have been easier to pass a law in line with international conventions, but it would not be enforced because Bolivia's reality has other needs and characteristics," said Mr Garcia.
The ILO says it is studying the legislation to decide whether it breaches international regulations on child labour.
A misspelt sign at a stop on Nottingham's tram network has been branded an "absolute joke".
[NEXT_CONCEPT]
Bolivia has lowered the legal working age to allow children to work from the age of 10 as long as they also attend school and are self-employed.