In a statement, Lee said that his controversial view -- espoused in a book released in January Lee Kuan Yew: Hard Truths to Keep Singapore Going, -- was outdated.
In the book, Lee argued that Singaporean Muslims faced difficulties in integrating because of their strict adherence to Islamic tenets, and urged them to "be less strict on Islamic observances".
"I would say today, we can integrate all religions and races except Islam," he said in the book.
"I think we were progressing very nicely until the surge of Islam came and if you asked me for my observations, the other communities have easier integration -- friends, intermarriages and so on," he also said.
Now he has retracted these opinions in the statement reported in Singapore's local media.
"Hard Truths was a book based on 32 interviews over a period of two years. I made this one comment on the Muslims integrating with other communities probably two or three years ago," he said
"Ministers and MPs (members of parliament), both Malay and non-Malay, have since told me that Singapore Malays have indeed made special efforts to integrate with the other communities, especially since 9/11, and that my call is out of date." Lee added.
"I stand corrected. I hope that this trend (of integration) will continue in the future," said Lee, 87, who remains an influential government adviser who serves as a "minister mentor" in the cabinet of his son, Prime Minister Lee Hsien Loong.
Lee's retractment followed expressions of unhappiness by the local Muslim community over his remarks, amid growing expectations the government will call for general elections within the year.
With general elections widely expected to be called before June, the government has been eager not to alienate Muslims, who represent around 15 per cent of the island state's population of five million, who are mostly ethnic Chinese.
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