As the parliamentary inquiry into freedom of speech continues this week, Dr Soutphommasane said Australia needed strong leadership to maintain cultural harmony.
"What I'm hearing from many communities is rising concern as a result of the populism that we see in the United States and elsewhere, and there is anxiety about that spilling over into Australia," he told a forum today in Adelaide.
Dr Soutphommasane, who has been the Race Discrimination Commissioner since 2013, argued that now more than ever, the nation needs to back the Racial Discrimination Act.
"We are in very challenging times today on racial harmony and social cohesion," he told the gathering of multicultural leaders.
"Very nasty forms of xenophobia and populism are on the rise in many countries, now is not the time for us to be letting the door open to that kind of social ill and evil."
Dr Soutphommasane argued the Act, including the contentious section 18C, strikes the right balance between protecting people from racial vilification while guaranteeing freedom of speech.
"It sets the standard for conduct in a multicultural society, and it gives people a means for holding others to account if they experience racial hatred and racial discrimination, and that's the way it should be," he said.
"It doesn't give you licence to abuse, harass or vilify others without there being some consequences.""People should enjoy freedom of speech, but like any freedom, it's not absolute.
The parliamentary inquiry, established late last year, is examining whether the Racial Discrimination Act imposes unreasonable limits on free speech and should be changed.
Specifically, it is investigating if the words 'insult' and 'offend' should be removed from section 18C, and replaced with the word 'vilify'.