He warned that racism still poses an "intolerable" blight on society and, saying that a climate of fear was not positive for integration.
Justin Welby was speaking as he held a special Near Neighbours interfaith event at Lambeth Palace to show the impact different interfaith bodies are having in communities across the UK.
"We have learnt how to do racism," he said.
He went on: "It is a deep shame that it is ever anywhere, I'm not looking at any political party, it's deeply embedded in so much of our culture in society."
"Attacks on mosques, dangerous political rhetoric that playing with words that raise tensions, the unthinking ignorant, fearful nature of much phobia about different faith traditions, the false perceptions that we lead parallel lives."
Muslims, Jews, Christians and Hindus were represented and the Archbishop said that the UK is home to an ever-changing society.
He told the parable of the Good Samaritan and told the audience that all faiths must work together: "We have the chance to celebrate a truly flourishing, a resilient and cohesive society - being only possible through initial social interaction, association and community transformation."
The Archbishop also stressed the importance of people knowing themselves and being comfortable in their own skin.
"It is so important for human beings to find their true identity is in who whom God has made them, not in who they make of themselves," he said.
Justin Welby also thanked the Government for its contribution towards projects: "We are genuinely really grateful to them, we really appreciate this contribution that's been consistent over a significant number of years now and has enabled these projects to run, and I want to say thank you for that funding."