Abdullah Badawi, seen as promoting a moderate form of Islam in largely Muslim Malaysia, said many Westerners see Muslims as congenital terrorists.
As he spoke at a conference in Kuala Lumpur, thousands protested outside at cartoons of the Prophet Muhammad. Friday's demonstration was the biggest in Malaysia's capital for years.
"Long live Islam. Destroy Denmark. Destroy Israel. Destroy George Bush. Destroy America," protesters shouted as they marched to the Danish embassy in the rain from a nearby mosque.
The satirical cartoons include an image portraying Muhammad with a bomb as his turban. While Islamic tradition supposedly prohibits any depiction of Allah and the Prophet, numerous examples of Muslim Art including Muhammad are documented throught the Islamic world.
The cartoons were first published by a Danish newspaper in September, but have since been reprinted in several other publications, including some not originally published by the author in question.
On Thursday, Mr Abdullah shut down indefinitely a Borneo-based paper, the Sarawak Tribune, for reprinting the cartoons. He described their publication as "insensitive and irresponsible".
The prime minister had also declared possession of the cartoons illegal.
Possession of a cartoon.. illegal....illegal..a cartoon.... The chasm isn't growing, Muslims are now realizing that the US will not bow down to their rediculious demands. To supress the right of others so their feeling aren't hurt. I guess there too busy promising death to everyone who doesn't follow their beliefs to see their own hypocritical anti-semetic attitude as a logical fallacy.