In an interview with The New York Times published on Sunday, Albright said she did not think Saddam Hussein had been an imminent threat to the United States.
"You can't go to war with everybody you dislike," she said.
"I think Iraq may end up being one of the worst disasters in American foreign policy."
Asked what she would consider the greatest mistake of the Bush administration, she said what troubles her is that democracy is getting a bad name "because it is identified with imposition and occupation".
She said much of what she had worked for during her tenure under Bill Clinton's presidency, has unraveled.
"I'm for democracy, but imposing democracy is an oxymoron. People have to choose democracy and it has to come up from below," she said.
Albright's comments come amid a growing chorus of domestic criticism of the Bush administration in the run-up to November's critical mid-term elections.
Also weighing in on the attack on Sunday was John Kerry, the US senator and 2004 Democratic presidential contender, who hit out at the administration for its failure to capture Osama bin Laden.
Kerry criticised Rumsfeld for
failing to capture Bin Laden
His comments came after a new audiotape attributed to the al-Qaeda leader was aired by Al Jazeera on Sunday.
Asked for his reaction, Kerry said: "It underscores the failure of this administration to capture him.
"This is one of the reasons Donald Rumsfeld should resign".
The biggest failure he said was the missed opportunity to capture bin Laden in the caves of Tora Bora in Afghanistan in late 2001.
"The design of the attack on Afghanistan, which had insufficient troops to surround Tora Bora, insufficient effort to commit American troops, was one of the great catastrophes of this entire effort in the war on terror," Kerry said.
"Osama bin Laden is loose today because we allowed him to escape at Tora Bora. It's that simple."