Britain stands by its decision to honour author Salman Rushdie, despite protests by Pakistan and Iran, Home Secretary John Reid has said.
Sir Salman has been accused of insulting Islam
While agreeing it was "sensitive", the right to express opinions was "of over-riding value" to society, he said.
Iraqi Foreign Minister Hoshyar Zebari said the knighthood was "untimely", but a matter for the British government.
Mr Rushdie went into hiding after an Iranian fatwa ordered his execution, over his 1988 book The Satanic Verses.
Mr Reid told an audience in New York that many Christians had been offended by Monty Python's Life of Brian, while some Jewish people were offended by Mel Gibson's film The Passion of the Christ.
"We have to be sensitive, but I think that we take the approach that in the long-run the protection of the right to express opinions in literature, argument and politics is of over-riding value to our society," he said.
"We have very strong laws about promoting racial tolerance. It isn't a free-for-all. We've thought very carefully about it.
"But we have a right to express opinions and a tolerance of other people's point of view, and we don't apologise for that."
Sir Salman was awarded a knighthood on Saturday, in the Queen's Birthday Honours.
Iran has protested, summoning the UK ambassador in Tehran and saying the award was a "provocative act".
"This insulting, suspicious and improper act by the British government is an obvious example of fighting against Islam," Iran's Foreign Ministry Director for Europe, Ebrahim Rahimpour, was quoted as saying by the state-run Irna news agency.
Pakistan has voiced similar protests, telling the UK envoy in Islamabad the honour showed the British government's "utter lack of sensitivity".
The British government has said the knighthood was not intended to insult Islam.
Foreign Secretary Margaret Beckett said: "Obviously, we are sorry if there are people who have taken very much to heart this honour, which is after all for a life-long body of literary work."
But she said Sir Salman was just one of many Muslims who had been recognised by the British honours system.
"This is part of the pattern that people who are members of the Muslim faith are very much part of our whole wider community," she said.
Asked about the row after talks with Mrs Beckett, Iraqi foreign minister Mr Zebari said: "We believe that with all due respect to the knighthood, I think that was untimely.
"This is our view and I don't have any official position from my government, let's say, on this issue. But I think it will be used by many quarters to exploit this issue outside its context."
But he added it was ultimately a decision for the British authorities.