Justin Welby pointed out the dire threat to Christians in the Middle East from the extremist group.
He recalled a meeting of regional Christian leaders in which one had called Islamic State "the worst threat we've faced since the Mongol invasion of 1259".
International Affairs Editor Rageh Omaar reports
Archbishop Welby also praised the "extraordinary courage" of many Islamic leaders who have spoken out against Islamic State, but called on religious leaders to continue to voice their opposition to the group.
He rejected the suggestion that British Muslim leaders could have been more bold in coming out against IS.
"The ones I know have been extremely bold and I can't say how much I admire their courage, because it's much harder for them than it is for me," he said.
As for his own solution, Archbishop Welby said the answer lay in people of different faiths offering a brighter alternative to the IS' bloodthirsty rhetoric.
The way it's confronted in the end is by those Muslim and Christian and other faiths who confront it offering a better narrative of the purpose and future of life, a more valuable life, a more beautiful life than is offered by Isis, and which is not difficult."