"The threat of terrorism can cause doubts and sow division between communities but multi-racial Singapore has avoided this danger because its people are rational and have looked at the facts squarely and forthrightly condemned extremists," he said.
Lee said he was particularly grateful to the city state's Malay-Muslim community, especially its leaders, who have maintained this position.
The Prime Minister also noted that the Mufti and the Religious Rehabilitation Group have done a lot to counter the ideological propaganda of Islamic State (IS).
This includes producing a brochure "The Fallacies of ISIS Islamic Caliphate" in English, Malay and Tamil, as well as two online videos to point out these fallacies and why the brutal methods employed by ISIS are against the teachings of Islam.
Lee stressed that extremist terrorism is a serious and difficult long-term problem.
The last such dialogue was held in 2011, according to media reports today. In 2011, the Jemaah Islamiyah had been reviving its network in the region, noted Lee.
"We have to carry on doing it and provided we continue to work together, and we are open to each other, and we share and we come closer together, we will prevail."
Lee said that terrorist elements in Southeast Asia are regrouping and getting more active, as the conflict in Syria and Iraq morphs into a civil war.
He said that people from Southeast Asia and around the world, including a few from Singapore, are also travelling to Iraq and Syria, to join IS.
"We have got to do what is necessary in order to protect Singapore and Singaporeans,"he added.
Singapore would also join over 60 countries, including many Muslim countries, in the coalition fight against IS.
Minister-in-charge of Muslim Affairs, Yaacob Ibrahim, has also called for a regional voice to condemn IS.
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