The urgent need for better cross-denominational relations in countries troubled by sectarian tension was highlighted as Asian religious leaders met in Indonesia for a conference aimed at fostering moderation and curbing extremism.

"The real challenge is to build the understanding between moderate leaders. That is the great challenge," Australian Foreign Minister Alexander Downer said in the Indonesian academic capital Yogyakarta, where the event was being held.

"Most followers of the great religions of the region and the world are moderate people. To get moderate leaders together and for them to promote their messages I think is enormously important," he said, according to a statement.

Indonesian President Susilo Bambang Yudhoyono, who opened the two-day International Dialogue on Interfaith Cooperation on Monday, warned militant violence was threatening to undermine longstanding spiritual beliefs.

"Terrorism must be regarded as an enemy of all religions. Terrorists are well-organised, well-funded and highly skilled in spreading mayhem and fear through the slaughter of the innocent.

"People of faith like you are committed to bringing enlightenment and... human values like tolerance and compassion."