Terry is accused of branding Queens Park Rangers player Anton Ferdinand a “fucking black cunt” during a match between Chelsea and QPR on October 23 last year.
Terry, standing trial at Westminster Magistrates Court in London, denies committing a racially aggravated public order offence. He has told the court he was sarcastically repeating words he thought Ferdinand had said to him.
Left-back Cole, taking the witness stand, said the allegations should not have been taken to court.
“I think we shouldn’t be sitting here,” said Cole, who is mixed-race.
While racism should never be tolerated, “if I repeated something that I thought you said, that’s totally different than if someone just says something”, he told the court.
He said Terry was an inspirational captain and one of the best because he remained cool, calm and collected when others might not.
Cole said Terry had never reacted to taunts on the pitch about an alleged affair with the mother of the former team-mate Wayne Bridge’s child.
Cole said that during the match in question, Ferdinand made a fist gesture to imply sex and said something “I can’t make out — him either saying Bridgey or black.”
He said he did not hear Terry saying anything in response.
Cole said he thought Ferdinand’s behaviour was “not necessary” and did not shake his hand afterwards.
Later during the match, Terry told Cole he thought Ferdinand had accused him of a racial slur.
After the game, Cole was present when Terry asked Ferdinand about the incident.
“I think John said ‘Did you think I called you a black cunt, did you think I was being racist?’. Then I said: ‘Did you think John was being racist?’ Anton said ‘No, no’.”
The two players then shook hands.
The defender said the situation was “hard” as he was friends with Terry and both Anton Ferdinand and his elder brother Rio, the Manchester United and England centre-back.
In a written character witness statement, Jose Mourinho said Terry had an excellent relationship with other players, regardless of their ethnicity, when the Portuguese manager was in charge of Chelsea between 2004 and 2009.
Mourinho, now the boss of Spanish champions Real Madrid, said Terry had played a leading role in championing the FA’s anti-racism campaigns.
“I never once witnessed any demonstration of racism or racial abuse or behaviour,” he said.
“I am certain that John Terry is not a racist.”
A statement was read out, signed by Chelsea team-mates past and present, including Frank Lampard, Fernando Torres, Petr Cech, Jose Bosingwa, Raul Meireles and Salomon Kalou.
“I have never heard John Terry use any form of racist language and have never heard any suggestion that he may have done so,” it said.
Ex-Chelsea assistant manager Ray Wilkins said Terry acted as a peacemaker in training when players fell out.
The former England captain said Terry had faced some “unmerciful criticism” down the years and he had never seen him react.
Terry, giving evidence on the third day of his trial, said he wanted to speak swiftly to the police and to the Football Association, the sport’s governing body in England, to address the allegations.
“I was keen to go forward with my police statement, my FA statement. If I had anything to hide I wouldn’t have done that,” he said.
“I knew there was nothing out there that would show that I had done anything wrong.”
The former England captain said he made a statement before seeing any footage of the incident.
The 31-year-old said he tried to call Rio Ferdinand, whom he partnered in England’s central defence.
Prosecutor Duncan Penny said to Terry: “You might have got in touch with Mr Ferdinand and said ‘Help me out here — this is going completely nuts’.”
Terry replied: “I did attempt to call Rio and he wouldn’t take my call, I didn’t have Anton’s number.”
If found guilty, Terry could be fined up to £2,500 ($3,850, 3,150 euros).
The trial continues Thursday, when the prosecution and the defence are expected to sum up their arguments.