The award of the 50,000 Australian dollar ($37,000) Sydney Peace Prize to the Bengal-born winner of the 1997 Booker Prize for her novel The God of Small Things, sparked outrage in Australia, which has troops serving in Iraq.
Several critics said Roy's views on Iraq should have disqualified her.
Roy was awarded this year's prize for what its judges said was her advocacy in demanding justice for the poor and people displaced by dam projects, as well as her opposition to nuclear weapons.
In a television programme screened by the Australian Broadcasting Corporation (ABC) last month, she called on people to "become the Iraqi resistance".
She said activists and resistance movements "need to understand that Iraq is engaging in the frontlines of empire and we have to throw our weight behind the Iraqi resistance".
But she told ABC radio on Wednesday that she did not mean people should engage in violence against multinational forces.
"We can't assume that resistance means terrorism because that would be playing right into the hands of the occupation"
Winner of 1997 Booker prize
"One wasn't urging them to join the army, but to become the resistance, to become part of what ought to be non-violent resistance against a very violent occupation," she said, adding that the term resistance needed to be redefined.
"We can't assume that resistance means terrorism because that would be playing right into the hands of the occupation," she said.
She also denied it was inappropriate for writers to try and influence political opinions. "I don't think how people's political views are influenced depends on the profession of the people who are influencing them," she said.
Roy, who will be presented on Thursday with the award, funded by the city of Sydney, previously branded US President George Bush as a "terrorist" and described Australia's military presence in Iraq as "inexcusable".
Roy has accused Australia of the
genocide of Aborigines
She has also accused Australia of genocide over what she believes to be its mistreatment of Aborigines, and is reportedly planning to donate her 50,000 Australian dollar peace prize to Aboriginal political activists.
The Sydney Peace Prize, no stranger to controversy, was awarded last year to prominent Palestinian spokeswoman Hanan Ashrawi, unleashing a torrent of anger from Jewish groups.