"Criticism is different to violence and destroying public property," he said in a cabinet meeting, according to the state broadcaster.
"Government bodies should provide space for legal criticism and protest," Rouhani said in his first public comments since the protests began on Thursday.
He also said US President Donald Trump had "no right" to sympathise with Iranian protesters who he has previously called terrorists.
"This man who today in America wants to sympathise with our people has forgotten that a few months ago he called the nation of Iran terrorist," Rouhani told the cabinet meeting.
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