Foreign Minister Syed Hamid Albar said on Friday that Islam had never advocated being anti anybody - including the Jews.
"The only problem with the Jews is when the State of Israel was created," Syed Hamid said, adding that Jews worked and were welcomed in Malaysia.
But Western governments leaped to criticise Mahathir Muhammad's speech, made on Thursday to a summit of the Organisation of the Islamic Conference (OIC).
Brains not brawn
In the speech, Mahathir urged Muslims to start using brains rather than brawn in their struggle against Israel.
Mahathir said the Jewish people, because of their relationship with the United States, had an influence in the world that far outweighed their numbers.
He said: "The Europeans killed six million Jews out of 12 million. But today the Jews rule this world by proxy."
The prime minister added Israelis were becoming too arrogant.
"Arrogant people, like angry people, will make mistakes, forget to think... This tiny community have become a world power. We cannot fight them through brawn alone. We must use our brains as well."
"Any suggestions by anybody anywhere in the world of dividing the world into Jewish and non-Jewish groupings is historically indefensible and wrong and something that... most Australians would regard as quite repugnant"
Australian prime minister
However, Australian Prime Minister John Howard said Mahathir's comments were "offensive" and "dangerous".
"Any suggestions by anybody anywhere in the world of dividing the world into Jewish and non-Jewish groupings is historically indefensible and wrong and something that all Australians, or most Australians, would regard as quite repugnant," he said.
And Italy, speaking for Europe, described Mahathir's remarks as strongly anti-Semitic.
"The prime minister of Malaysia used gravely offensive expressions not only towards the Jews - expressions that are strongly anti-Semitic - but also words that ran counter to the principles of tolerance and dialogue between the West and the Muslim world," Italian Foreign Minister Franco Frattini said.
Missing the point
Nevertheless, the Malaysian foreign minister said Mahathir's remarks had been taken out of context.
Syed Hamid Albar said most foreign media had missed the prime minister's main point - that Muslims should make peace because they could not win the Palestinian conflict through violence.
"I'm sorry he has created this adverse interpretation," he said, adding the speech criticised Muslims more for not using their heads as the Jews had done to promote their cause.
Meanwhile, Arab leaders said Mahathir, known for his blunt ways, was simply telling it like it is.
“This proves how far Israel and its allies have succeeded in sanctifying Israel, preventing any side from criticising it"
Egyptian political analyst
"I don't think they (the remarks) are anti-Semitic at all. I think he was stating the facts," Yemeni Foreign Minister Abu Bakr al-Qirbi said.
Egyptian Foreign Minister Ahmed Maher added: "There are people wanting to create trouble, invent problems that do not exist... I would advise them to read the whole speech, which was a speech addressed to Muslims asking them to work hard and affirm their personality."
And Fahmi Huwaidi, an Egyptian political analyst, told Aljazeera: “Nowadays, any criticism against the Jews and the Jewish policy is considered anti-Semitic.
“This proves how far Israel and its allies have succeeded in sanctifying Israel, preventing any side from criticising it."
He added: “Such a common view proves Muhammad’s comment on the extent to which the Jewish global influence has reached.”