In an exclusive interview with the BBC, the Nobel peace prize winner acknowledged problems in Rakhine state, where the Rohingya people live.
But she said ethnic cleansing was "too strong" a term to use.
Instead, Myanmar's de-facto leader said the country would welcome any returning Rohingya with open arms.
"I don't think there is ethnic cleansing going on. I think ethnic cleansing is too strong an expression to use for what is happening," she told the BBC's special correspondent Fergal Keane.
