As the two-day meeting opened, Indonesian President Susilo Bambang Yudhoyono said mutual respect and diversity are the foundations of democracy.
"We need to encourage greater respect for different values, faiths and religious beliefs," Yudhoyono said. "We should not allow irresponsible acts such as the defamation of religion to divide us."
Dinna Wisnu, an international political analyst from Indonesia's Paramadina Graduate School of Diplomacy, said Ahmadinejad is likely attending the event to try to find a place to fit in. And even if some Asian countries are not welcoming, the region as a whole is typically more accepting.
"Iran comes with its special agenda that has been planned as the country does not have a lot of friends in the Middle East," she said. "They are in a difficult position. If they are not trying to make friends in other regions, Iran will be alone."
Iran has long been criticized for its human rights record, including the continued use of stoning as a method of capital punishment. Increased Internet crackdowns and the jailing of political prisoners and journalists were also recently highlighted in a report by the U.N.'s human rights expert on Iran.
The country erupted into violence three years ago when pro-democracy protesters took to the streets to demonstrate against the election of Ahmadinejad.
The international community fears Iran may be interested in possessing nuclear weapons, but the country has repeatedly said its uranium enrichment program is meant only for peaceful purposes. The U.S. and European Union have hit Iran hard with economic sanctions as a result of those concerns.
Meanwhile on Thursday, South Korean President Lee Myung-bak praised Indonesia as a Muslim nation with a thriving democracy, adding it was also encouraging to see countries like Myanmar undergo positive political reform. But he said more work needed to be done elsewhere.
"Unfortunately, we also saw how a 15-year-old Pakistani girl was shot as she promoted women's rights in her country," he said.
"Likewise, since 2003, the North Korean people can see but cannot speak, they have legs but cannot move. Human rights cannot be compromised there," he added.
The fifth Bali Democracy Forum on Indonesia's resort island comes a day after President Barack Obama was re-elected in the U.S. election. The event is being attended by 11 heads of state, including Australian Prime Minister Julia Gillard and Afghan President Hamid Karzai.
Associated Press writer Niniek Karmini contributed to this report from Jakarta, Indonesia.