The actress and UN special envoy recruited local children to star in her film about Cambodia's Khmer Rouge, First They Killed My Father.
She spoke to Vanity Fair about the film and explained how they used a casting game which involved giving money to poor children then taking it away.
The interview caused outrage, with many accusing Jolie of being "exploitative".
In it, Jolie explains how the directors looked through slums and orphanages to find actors for the film, and were "specifically seeking children who had experienced hardship".
Their casting game saw children being asked to snatch some money, and then when caught, come up with a lie for why they stole it.
"Srey Moch [who was selected for the lead role] was the only child that stared at the money for a very, very long time," Jolie told the magazine.
"When she was forced to give it back, she became overwhelmed with emotion... When she was asked later what the money was for, she said her grandfather had died, and they didn't have enough money for a nice funeral."
Jolie, who directed the Netflix film, said it was "false and upsetting" that people misinterpreted her description of the casting process.
"I am upset that a pretend exercise in an improvisation, from an actual scene in the film, has been written about as if it was a real scenario," Jolie said in a statement.
She added: "The point of this film is to bring attention to the horrors children face in war and to help fight to protect them. The suggestion that real money was taken from a child during an audition is false and upsetting. I would be outraged myself if this had happened."
"Every measure was taken to ensure the safety, comfort and well-being of the children on the film starting from the auditions through production to the present," she said.