Most Revd Justin Welby was in Cardiff as it emerged that two brothers from the city have been added to a list of UK militants subject to United Nations sanctions after fleeing to Syria.
Speaking at an inter-faith event organised by the Muslim Council of Wales, the archbishop urged all faith groups to "go the extra mile in the service of the common good" as they grapple with those who abuse religion.
He said: "We have unequivocally to condemn those who misuse our own scriptures for their own ends. But condemnation, a negative, is not enough.
"The mainstreams of our faiths are not at the mercy of the radicalisers who seek, in all the major faith traditions of the world, to radicalise and to marginalise the mainstream.
"The mainstream of each faith needs to generate a counter-narrative that acknowledges our differences and commits to resource and support one another in defiance of those who wish to divide us.
"The counter-narrative must be so exciting and so beautiful that it defeats the radicalisers, with their message of hate and despair."
He continued: "Faith communities must go the extra mile, compete with each other in the service of the common good without the falsity of syncretism. In our genuine, truthful and loving communication and action lies the challenge to fear, the building of the common good."
The archbishop also expressed his sadness over the death of hundreds of people on pilgrimage in Mecca.