"That hurts me so much," Clinton said. "It's a painful perception to hear about and I deeply regret that anyone believes that or propagates it."
Clinton said that the decade of US-led war was "self-defence" after the September 11, 2001 attacks by Al-Qaeda and said extremists "perverted" the teachings of Islam.
"Is there discrimination or prejudice in the United States like in every society and country in the world? Unfortunately yes. Human nature has not changed dramatically," she said.
"There is discrimination against people of different religions, of different races, of different ethnic groups all over the world... but I don't think that it is at all fair to hold up the United States" over discrimination, she said.
"I believe that the United States through our laws and through our constant political dialogue has gone probably farther than anywhere else in the world in trying to guarantee legal protections for people. I would like to see more countries do more to protect the rights of minorities," she said.
The United States has long had a cooperative relationship with Bangladesh, which is known for its moderate brand of Islam and has a significant population of religious minorities.
But Clinton is the first US secretary of state to visit Bangladesh since 2003 amid concern over political infighting that has long polarised the country.