Responding to a question from Christian Conservative MP Fiona Bruce during Prime Minister's Questions, Mr Cameron said people needed to "exercise some common sense in making these judgements".
The Member for Congleton raised the issue just days after reports suggested an unnamed college Christian union had been stopped from meeting because of concerns that the group may be breaching Prevent guidelines.
The legislation was put together to stop children being influenced by extremists.
Prevent is one of the four arms of CONTEST: the British government's umbrella initiative for countering extremism
It defines extremism as "vocal or active opposition to fundamental British values, including democracy, the rule of law, individual liberty and mutual respect and tolerance of different faiths and beliefs. We also include in our definition of extremism calls for the death of members of our armed forces, whether in this country or overseas."
It focuses on stopping people becoming radicalised before this opposition occurs
Millions of pounds have been spent on Prevent
It's one-on-one mentoring programme has been praised, but it's also been criticised for stigmatising Muslims and for failing to stop people joining Islamic State abroad
Speaking in the Commons, she said: "Next week, the annual National Parliamentary Prayer Breakfast will take place here in Westminster Hall, when 600 community and faith leaders, and over 100 MPs, will gather.
"Yet, also this week we hear of a Christian Union being banned from holding prayer and Bible study meetings, purportedly on the grounds of the Government's anti-terrorism Prevent Strategy.
"Does the Prime Minister agree that such action was never the purpose of a strategy intended to address terrorism and extremism?"
Responding, the Prime Minister said: "Of course, what my friend says is right, the point she makes about the Prevent duty being misused: I haven't heard of that exact example, but it's clearly ludicrous, and people do need to exercise some common sense in making these judgements, because it's quite clear that's not what was intended."
The Christian charity Festive is working with the Christian Union in question but has kept the college's identity confidential.
It claims the group has done nothing wrong and that no formal complaint has been made.
Speaking on Premier's News Hour on Monday, Festive's Director Toni Coulton said: "I can't imagine what a Christian union could be doing."
"If one came to us and we had any suspicion that they needed some help in some way we would go to the local churches and say this CU needs some help... but we have no indication that this is the case."
It is believed to be the first Christian Union to be barred under Prevent - however there are reports that two other groups are facing similar issues.
The government has said it cannot comment on the case, as it is currently unaware which Christian union has been prohibited from meeting.