The mayor made the comment Tuesday in an impassioned speech at a dinner in observance of Iftar, the daily meal in which Muslims break their fast during the holy month of Ramadan.
"We would undercut the values and principles that so many heroes died protecting," Bloomberg said at the dinner Tuesday in observance of Iftar, the breaking of the daily fast during Ramadan.
The mayor said he understood the "impulse to find another location for the mosque" but a compromise won't end the debate.
"The question will then become how big should the no-mosque zone around the World Trade Center be," Bloomberg said. "There is already a mosque four blocks away. Should it, too, be moved?"
Sharif el-Gamal, the mosque site's developer, and Daisy Khan, a co-founder of the group planning the mosque, were also at the dinner attended by about 100 people, including members of the Muslim community and city officials such as police Commissioner Raymond Kelly.
After Bloomberg spoke, el-Gamal said he was "very honored and blessed" to be an American and a New Yorker.
"Mayor Bloomberg's speech embodied the values and the mores that we as Muslim Americans live and cherish," el-Gamal said.
Khan said Bloomberg "delivered a passionate speech in defense of our deep American values."
Meanwhile, the heated rhetoric surrounding the proposal for an Islamic community center and mosque two blocks from ground zero drew concern from Archbishop Timothy Dolan, who said Tuesday the tense climate could put New Yorkers in danger of losing their sense of tolerance and unity, values they embraced in the days after Sept. 11.
"We're just a little bit apprehensive that those noble values may be a bit at risk in the way this conversation and debate about the site of the mosque is taking place," Dolan, the leader of the area's Roman Catholics, said after a meeting with Gov. David Paterson about the issue.
A national survey underscored the complex views of Americans toward the mosque project, with 51 percent agreeing with opponents of the Muslim center, while 34 percent said they supported it. The poll of 1,003 randomly chosen adults was conducted by the nonpartisan Pew Research Center and showed that a majority, 62 percent, also said Muslims have equal rights to build houses of worship.
While supporters of the mosque say religious freedom should be protected, opponents say the mosque should be moved farther away from where Islamic extremists destroyed the World Trade Center and killed nearly 2,800 people on Sept. 11, 2001.
Dolan said both sides of the debate have legitimate stances.
"I sure don't have strong feelings on where the mosque should ultimately be," he said during a brief news conference after meeting with the governor.
They spoke about how religion can be brought to bear on the debate over the proposal in an effort to encourage reconciliation and community, rather than divisiveness, Dolan said, and expressed willingness to be part of the dialogue if asked.
New York Assembly Speaker Sheldon Silver, who represents the lower Manhattan district where ground zero is, suggested Tuesday that Islamic leaders should move the proposed mosque. Paterson has made the same point.
Organizers have the right to build the center at a building two blocks north of ground zero but should be open to compromise, Silver said.
"In the spirit of living with others, they should be cognizant of the feelings of others and try to find a location that doesn't engender the deep feelings the currently exist about this site," Silver said.
Paterson has yet to meet with anyone from The Cordoba Initiative, the project's organizer.
Its co-founder, Imam Feisal Abdul Rauf, is on a Mideast trip funded by the U.S. Department of state. He alluded to the controversy at a dinner Sunday night for student leaders at the U.S. ambassador's residence in Manama, Bahrain.
"The fact we are getting this kind of attention is a sign of success," he said. "It is my hope that people will understand more. ... This is something we are doing for your generation."
Rauf also thanked President Barack Obama, who has said Muslims have the right to practice their religion and build the Islamic center in lower Manhattan. The president later said he wasn't endorsing the specifics of the plan.
The White House said Tuesday that Obama would have no further comment on the issue and that the administration will not get involved in talks about relocating the facility. Republicans have vowed to make Obama's supportive comments a campaign issue in this fall's midterm elections.
Below is the full text of Bloomberg's speech:
"Good evening, and Ramadan Kareem. I want to welcome everyone to our annual Ramadan Iftar at Gracie Mansion.
"We call this 'The People's House,' because it belongs to all 8.4 million New Yorkers who call this city home. People of every race and religion, every background and belief. We celebrate that diversity here in this house with gatherings like this.
"And for me, whether it's marking St. Patrick's Day or Harlem Week or any other occasion, these gatherings are always a powerful reminder of what makes our city so strong and our country so great.
"America is a nation of immigrants, and no place opens its doors more widely to the world than New York City. America is the land of opportunity, and no place offers its residents more opportunity to pursue their dreams than New York City. America is beacon of freedom, and no place defends those freedoms more fervently, or has been attacked for those freedoms more ferociously, than New York City.
"In recent weeks, a debate has arisen that I believe cuts to the core of who we are as a city and a country. The proposal to build a mosque and community center in Lower Manhattan has created a national conversation on religion in America, and since Ramadan offers a time for reflection, I'd like to take a few minutes to reflect on the subject.
"There are people of good will on both sides of the debate, and I would hope that everyone can carry on the dialogue in a civil and respectful way. In fact, I think most people now agree on two fundamental issues: First, that Muslims have a constitutional right to build a mosque in Lower Manhattan and second, that the site of the World Trade Center is hallowed ground. The only question we face is: how do we honor that hallowed ground?
"The wounds of 9/11 are still very much with us. And I know that is true for Talat Hamdani, who is here with us tonight, and who lost her son, Salman Hamdani, on 9/11. There will always be a hole in our hearts for the men and women who perished that day.
"After the attacks, some argued ? including some of those who lost loved ones ? that the entire site should be reserved for a memorial. But we decided ? together, as a city ? that the best way to honor all those we lost, and to repudiate our enemies, was to build a moving memorial and to rebuild the site.
"We wanted the site to be an inspiring reminder to the world that this city will never forget our dead and never stop living. We vowed to bring Lower Manhattan back ? stronger than ever ? as a symbol of our defiance and we have. Today, it is more of a community neighborhood than ever before, with more people than ever living, working, playing and praying there.
"But if we say that a mosque and community center should not be built near the perimeter of the World Trade Center site, we would compromise our commitment to fighting terror with freedom.
"We would undercut the values and principles that so many heroes died protecting. We would feed the false impressions that some Americans have about Muslims. We would send a signal around the world that Muslim Americans may be equal in the eyes of the law, but separate in the eyes of their countrymen. And we would hand a valuable propaganda tool to terrorist recruiters, who spread the fallacy that America is at war with Islam.
"Islam did not attack the World Trade Center ? Al-Qaeda did. To implicate all of Islam for the actions of a few who twisted a great religion is unfair and un-American. Today we are not at war with Islam ? we are at war with Al-Qaeda and other extremists who hate freedom.
"At this very moment, there are young Americans ? some of them Muslim ? standing freedoms' watch in Iraq and Afghanistan, and around the world. A couple here tonight, Sakibeh and Asaad Mustafa, has children who have served our country overseas and after 9/11, one of them aided in the recovery efforts at Ground Zero. I'd like to ask them to stand, so we can show our appreciation. Thank you.
"The members of our military are men and women at arms ? battling for hearts and minds. And their greatest weapon in that fight is the strength of our American values, which have always inspired people around the world. But if we do not practice here at home what we preach abroad ? if we do not lead by example ? we undermine our soldiers. We undermine our foreign policy objectives. And we undermine our national security.
"In a different era, with different international challenges facing the country, President Kennedy's Secretary of State, Dean Rusk, explained to Congress why it is so important for us to live up to our ideals here at home. He said, 'The United States is widely regarded as the home of democracy and the leader of the struggle for freedom, for human rights, for human dignity. We are expected to be the model.'
"We are expected to be the model. Nearly a half-century later, his words remain true. In battling our enemies, we cannot rely entirely on the courage of our soldiers or the competence of our diplomats. All of us must do our part.
"Just as we fought communism by showing the world the power of free markets and free elections, so must we fight terrorism by showing the world the power of religious freedom and cultural tolerance. Freedom and tolerance will always defeat tyranny and terrorism ? that is the great lesson of the 20th century, and we must not abandon it here in the 21st.
"I understand the impulse to find another location for the mosque and community center. I understand the pain of those who are motivated by loss too terrible to contemplate. And there are people of every faith ? including, perhaps, some in this room ? who are hoping that a compromise will end the debate.
"But it won't. The question will then become, how big should the 'no-mosque zone' around the World Trade Center be? There is already a mosque four blocks away. Should it too, be moved?
"This is a test of our commitment to American values. We must have the courage of our convictions. We must do what is right, not what is easy. And we must put our faith in the freedoms that have sustained our great country for more than 200 years.
"I know that many in this room are disturbed and dispirited by the debate. But it is worth keeping some perspective on the matter. The first colonial settlers came to these shores seeking religious liberty and the founding fathers wrote a constitution that guaranteed it. They made sure that in this country the government would not be permitted to choose between religions or favor one over another.
"Nonetheless, it was not so long ago that Jews and Catholics had to overcome stereotypes and build bridges to those who viewed them with suspicion and less than fully American. In 1960, many Americans feared that John F. Kennedy would impose papal law on America. But through his example, he taught us that piety to a minority religion is no obstacle to patriotism. It is a lesson that needs updating today, and it is our responsibility to accept the challenge.
"Before closing, let me just add one final thought: Imam Rauf, who is now overseas promoting America and American values, has been put under a media microscope. Each of us may strongly agree or strongly disagree with particular statements he has made. And that's how it should be ? this is New York.
"And while a few of his statements have received a lot of attention, I would like to read you something that he said that you may not have heard. At an interfaith memorial service for the martyred journalist Daniel Pearl, Imam Rauf said, 'If to be a Jew means to say with all one's heart, mind, and soul: Shma` Yisrael, Adonai Elohenu Adonai Ehad; Hear O Israel, the Lord our God, the Lord is One, not only today I am a Jew, I have always been one. If to be a Christian is to love the Lord our God with all of my heart, mind and soul, and to love for my fellow human being what I love for myself, then not only am I a Christian, but I have always been one.'
"In that spirit, let me declare that we in New York are Jews and Christians and Muslims, and we always have been. And above all of that, we are Americans, each with an equal right to worship and pray where we choose. There is nowhere in the five boroughs that is off limits to any religion.
"By affirming that basic idea, we will honor America's values and we will keep New York the most open, diverse, tolerant, and free city in the world. Thank you."
(The Associated Press contributed to this report)