The star was criticised after a recent Vanity Fair profile described how casting directors looked through Cambodian orphanages, circuses, and slum schools to find a child actor to play their lead, Loung Ung.
During the auditions, they also set up a game where money was put on a table and children were encouraged to think of what they needed it for before the cash was snatched away.
"Srey Moch (the girl ultimately chosen for the part) was the only child that stared at the money for a very, very long time. When she was forced to give it back, she became overwhelmed with emotion.
However, Jolie, 42, who adopted her oldest son Maddox, 15, from Cambodia, has now clarified the casting process and revealed that the game was a "pretend exercise in an improvisation, from an actual scene in the film".
In a statement to Variety, she said, "Every measure was taken to ensure the safety, comfort and well-being of the children on the film starting from the auditions through production to the present.
"The suggestion that real money was taken from a child during an audition is false and upsetting. I would be outraged myself if this had happened," she added.
"First They Killed My Father" is Jolie's directorial debut for streaming giant Netflix.
It is based on a true-life account of a survivor of the Khmer Rouge genocide and is told through the eyes of a child.
Her controversial account of casting drew outrage among many, with social media users calling it "emotionally abusive and cruel".
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