Vance lambasted European leaders on Friday, the first day of the Munich Security Conference, accusing them of censoring free speech and criticising German mainstream parties' "firewall" against the far-right Alternative for Germany (AfD).
"That is not appropriate, especially not among friends and allies. We firmly reject that," Scholz told the conference on Saturday, adding there were "good reasons" not to work with the AfD.
The anti-immigration party, currently polling at around 20 per cent ahead of Germany's February 23 national election, has pariah status among other major German parties in a country with a taboo about ultranationalist politics because of its Nazi past.
"Never again fascism, never again racism, never again aggressive war. That is why an overwhelming majority in our country opposes anyone who glorifies or justifies criminal National Socialism," Scholz said, referring to the ideology of Adolf Hitler's 1933-45 Nazi regime.
Vance met on Friday with the leader of AfD, after endorsing the party as a political partner — a stance Berlin dismissed as unwelcome election interference.
Referring more broadly to Vance's criticism of Europe's curtailing of hate speech, which he has likened to censorship, Scholz said: "Today's democracies in Germany and Europe are founded on the historic awareness and realisation that democracies can be destroyed by radical anti-democrats.
"And this is why we've created institutions that ensure that our democracies can defend themselves against their enemies, and rules that do not restrict or limit our freedom but protect it."
French Foreign Minister Jean-Noel Barrot added his voice to the defence of Europe's stance on hate speech.
"No one is required to adopt our model but no one can impose theirs on us," Barrot said on X from Munich.
"Freedom of speech is guaranteed in Europe."
The prospect of talks to end the Ukraine-Russia war had been expected to dominate the annual Munich conference after a phone call between US President Donald Trump and Russian leader Vladimir Putin this week, but Vance barely mentioned Russia or Ukraine in his speech to the gathering on Friday.
Instead, he said the threat to Europe that worried him most was not Russia or China but what he called a retreat from fundamental values of protecting free speech - as well as immigration, which he said was "out of control" in Europe.
Many conference delegates watched Vance's speech in stunned silence. There was little applause as he delivered his remarks.
Asked by the panel moderator if he thought there was anything in Vance's speech worth reflecting on, Scholz drew laughter and applause in the crowd when he responded, in a deadpan manner: "You mean all these very relevant discussions about Ukraine and security in Europe?"
