The opera "Idomeneo" was removed from the Deutsche Oper's November schedule after police warned it could provoke violent reactions from Muslims undermined creative freedom.
Culture Minister Bernd Neumann said the decision was cowardly.
"If worries about possible protests leads to self-censorship, that threatens democratic culture," he said in a statement.
"It requires tolerance and courage from us all: tolerance in the face of uncomfortable opinions and courage in the face of controversy. You cannot solve problems by being silent."
Director Hans Neuenfels's production sparked outraged reactions in the audience during its premiere in December 2003 for a bloody climax featuring Poseidon, Jesus, Buddha and Mohammed.
German critics at the time saw the show as a radical attack on religion and religious wars.
The original opera, a 1781 drama set in ancient Crete, deals with resistance to sacrifices demanded by the gods but makes no mention of any of the world's major faiths.
Mr Neuenfels blasted Deutsche Oper's decision as being driven by "hasty obedience and hysteria".
But musical director Kirsten Harms defended the cancellation as the only responsible decision in light of the security risk.
"If we ignored the warning and continued to put on the production and then something happened, everyone would have said 'she disregarded the warning,” Ms Harms told a news conference.
"It is easy to say it was cowardly."
The Berlin police confirmed they had raised the alarm in July over the production but said they had received no specific threats of a planned attack.
Officials from across the political spectrum said the cancellation could have a chilling effect throughout the art world.
Turkish community leader Kenan Kolat said that although he could understand why some Muslims would be angered by the opera, they must accept creative liberty in a democratic society.
But the leader of the Islamic Council, Ali Kizilkaya, said the staging was deeply offensive to Muslims, of whom some 3.2 million live in Germany, and was unacceptable.