He was speaking as the house discussed extremist interpretations of Islam.
Justin Welby insisted that some comments were unacceptable, however he added that others were part of general debate.
He said: "It is widely agreed that all statements that tend towards causing hatred, contempt, violence, for other faiths should not be permitted.
"Nevertheless, it is not extremist in any way, and should be encouraged, that there are statements that are frank and categorical assertions of faith, or no faith, and that there is no right not to be offended, or to be hurt, by such statements."
Home Office Minister, Lord Ahmad of Wimbledon, said the right to offend someone should be protected: "I agree on the whole issue of interpretations, and the right, or rights, not to be offended because that is after all what we are protecting here in our country."
He added: "The right to offend someone, and not be offended, remains a value we wish to protect.
"But those who seek to divide us, those who seek to create division between society and faith, we need to stand up to that and that is certainly what our counter-extremism strategy is all about."
The Archbishop of Canterbury became involved in the discussion after Liberal Democrat Lord, Wallace of Saltaire, asked about the progress of a review into the funding of extremist interpretations of Islam.
Lord Ahmad responded, saying David Cameron expected to receive the report in the spring.
