The former Archbishop of Canterbury has made a fresh speech on Islam weeks after linking the religion to violence.
Lord Carey: Attacked over earlier speech
George Carey said Muslims and the West needed to confront mutual suspicions.
But he added that the fears which had led to Islamophobia in the West could not simply be brushed aside as 'nonsense'.
In his new speech made in Leicester, Lord Carey said his earlier comments in Rome had been taken out of context and had ignored his criticisms of the West.
In that speech, delivered in March to an audience in Rome, Lord Carey linked Islam with authoritarian regimes in the Middle East and asked why a great tradition of Islamic scholarship had apparently withered away.
He called on religious leaders in the Middle East to be unequivocal in their condemnation of suicide bombers.
But in a fresh speech to a multi-faith audience on Wednesday, Lord Carey said those who believed he was being wholly critical of the Islamic world "were looking in the wrong direction".
"Those who took the trouble to read my lecture will have noted that I was as critical of the West, of Christianity and, for that matter, also sharply critical of Israel's policy with respect to Palestine," he said.
'Clash of civilisations'
Lord Carey, who retired in 2002, said his earlier concerns came from an increasing frustration over the lack of dialogue between different faiths and cultures and ill-founded talk of a "clash of civilisations".
"Our world is in great peril. I am talking rather about a sharp ideological tension that separates the West from another world, that we call Islamic and yet does not reflect the true values of Islam," he said.
"The association of Islam with terrorism is an issue that concerns not only Muslims but us all.
"A seriously disturbing feature is the assumption that the clash [of civilisations] will arise not from extremists but from the very being, the heart of Islam.
"Once that assumption is believed then no dialogue is possible; a state of war exists between two quite different civilisations. We cannot be content with this assumption."
The West and Muslims had to think deeply about mutual suspicions, said the former archbishop.
"A good number of letters I have received since my [Rome] lecture reveal a worrying ignorance of Muslim people and suspicion of their presence in the United Kingdom," he said.
"It is assumed by many that Muslims wish to take over 'our' country and if we allow them to enter Britain in significant numbers they will in time make the country Islamic."
Israeli policies condemned
Lord Carey said simply dismissing these fears would not prevent people believing them - in the same way that you could not brush aside Muslims' fears that Western dominance would lead to the destruction of their societies and cultures.
At the same time, he added, he recognised how Muslims were angered over the treatment of the Palestinians and, more recently, the war in Iraq.
"The policy of the present government in Israel towards Palestine is indefensible and America's bias in favour of Israel outrages millions of people throughout the world.
"I say this as someone who firmly believes in the right of Israel to exist. But the Palestinian people have become humiliated and downtrodden.
"Let us make no mistake about it, the plight of the Palestinian people is the emotional epicentre of our current troubles and healing this deep wound will go a substantial way to creating a more peaceful world."
But he added that nothing could justify suicide bombings.
"I remain unapologetic about appealing to Muslim leaders to condemn outright such actions and to go on condemning.
"If Islamic leaders [in the Middle East] give support to a theology that suicide bombers are in actual fact 'martyrs', this not only lends strong theological endorsement to such military tactics but also discredits Islam world-wide."