The 'X Factor' USA judge thinks 20-year-old Miley is a genuine talent but people only focus on her twerking.
She offered support for her fellow former Disney star and told Katie Couric on her talk show: "I think she knows what she's doing.
"A lot of artists take that route of shock value and that's totally fine and that's great, but I think that she has such an incredible voice that's overshadowed by some of the things she's doing."
She added: "You know it's her journey, she's having fun, she's being who she is and will always love her."
The 21-year-old star and 'Wrecking Ball' singer have been friends since they were 14 and both grew up as child stars, which Demi found difficult, spending time in rehab in 2010 after struggling with bulimia and self-harming.
She said: "Everyone's on their different journey's right now and she's doing that and having fun, so power to her."
"I think that the world kind of needs to get over the fact that she was Hannah Montana when she was like 16 or whatever.
"Same thing with me, but I guess my transition was a little different because I went straight to rehab, but - I didn't twerk, I just went to rehab."
The former actress asked for people to be kinder to her fellow stars, including the Jonas Brothers and Selena Gomez.
She added: "It's something that is just - nobody knows [Miley], and nobody knows who I really am, and same with Selena Gomez and Jonas and everybody that's grown up in front of the public eye.
"We're adults now ... I'm 21 and I'm nowhere near the same person that I was when I was 15 ... so go a little easy on us America."