Wen had said earlier on Tuesday that China had "ample fact and plenty of evidence proving this incident was organised, premeditated, masterminded and incited by the Dalai clique".
The Dalai Lama responded that "if things are getting out of control, then the option is to completely resign.
"This movement is beyond our control."
The Dalai Lama fled into exile in India in 1959 following a failed uprising against Chinese rule.
His comments came as the Tibetan government-in-exile, based in Dharamsala, northern India, said 19 Tibetan protesters were shot dead in China's Gansu province on Tuesday.
It said that a total of 99 people had died after a week of unrest.
China says Tibetan rioters killed 13 civilians during the protests in Lhasa, and that the Chinese government did not use lethal force to quell the rioting.
Speaking from Dharamsala, the Dalai Lama said he was not in a position to tell Tibetans living under Chinese rule to "do this or do not do that".
The Dalai Lama also said that independence for Tibet was "out of the question".
"We must build good relations with the Chinese," he said.
The Dalai Lama appealed for calm in Tibet, saying: "Don't commit violence, it is not good. Violence is against human nature, violence is almost suicide. Even if 1,000 Tibetans sacrifice their lives, it will not help.
"We should not develop anti-Chinese feelings. We must live together side by side."
Wen's criticism of the Dalai Lama is the highest-level response so far to the biggest protests against Chinese rule in almost two decades.
He said the protests had shown that "consistent claims by the Dalai clique that they pursue not independence but peaceful dialogue are nothing but lies".
|Wen: China will talk to Dalai Lama only when|
he gives up independence ambitions [AFP]
's crackdown on the protesters, he said the response of the security forces had been "extremely restrained" but he avoided giving any details on the situation on the ground in Tibet
The protests have also spread from Tibet to Tibetan communities in neighbouring Chinese provinces.
The Chinese prime minister avoided commenting on that development.
Wen said the Dalai Lama's accusations that China was committing "cultural genocide" in Tibet were "nothing but lies".
He said those who had protested against Chinese rule wanted to undermine the staging of the Beijing Olympics, which open on August 8.
Hinting at calls from some groups for a boycott of the Games, Wen said the Olympics should not be politicised.
1950 China invades Tibet
1959 Dalai Lama flees to exile in India after failed uprising against Chinese rule
1960s-70s Hundreds of monasteries destroyed during Chinese Cultural Revolution
1965 China announces creation of Tibet Autonomous Region
1989 Dalai Lama awarded Nobel Peace Prize for leading non-violent struggle for Tibet
2006 Opening of first rail line linking Tibet to rest of China
Wen's comments came hours after a deadline passed for protesters involved in the Lhasa uprising to give themselves up to Chinese authorities.
Qiangba Puncog, the Chinese-installed governor of Tibet, set the deadline for midnight on Monday, warning of "harsh" treatment for those who refused to surrender.
There was little indication of any protesters having surrendered after the deadline.
On Tuesday the US-funded Radio Free Asia reported that hundreds of people were being rounded up by security forces, in a possible sign of an intensified crackdown.
Tibet is largely cut off from the outside world, with foreign reporters barred from the territory.
Even activist groups with long-standing connections to contacts in Tibet have indicated they are having difficulty finding out what is happening in the region.
The uprising in Tibet and the response of the Chinese authorities have sparked protests outside Chinese diplomatic missions around the world.
Several demonstrations have called for the Beijing Olympics, which begin in less than five months time, to be boycotted.
On Tuesday about 100 protesters clashed with Australian police outside the Chinese consulate in Sydney.
Several protesters burned Chinese flags, while others attempted to storm the consulate gates.
Police in Kathmandu, Nepal's capital, also said on Tuesday that they arrested about 50 protesters who were demonstrating for a UN investigation into China's operation against Tibetan demonstrators.
Bernard Kouchner, France's foreign minister, said on Tuesday that the European Union may consider staying away from the opening ceremony of the Olympics, but stopped short of calling for a full boycott.
"Let us consider it," he said, arguing that staying away from the opening ceremony would be "less negative than a general boycott of the games".