The singer stuck up for her fellow Disney starlet when quizzed about her controversial behaviour and provocative new image, claiming she is ''happy'' the 'Wrecking Ball' hitmaker is exploring her potential as an artist.
She told Fox31's 'Everyday' programme: ''I know Miley very well. Miley has been one of my best friends growing up and so I'm happy for her. She's doing what she wants to do and this is her time to break out and figure out, you know, what she wants to do in her career and her image and everything.''
While clean-cut Demi didn't endorse her pal's choices - such as appearing naked in her new music video and twerking up against Robin Thicke at the VMAs this summer - the pop star says she respects Miley for not caring what people think.
She said: ''I'm happy seeing her happy because I love her so much. And, you know, she doesn't care what people think, nor should she.''
The 21-year old singer - who checked into rehab for depression, self-harm and bulimia in 2010 - previously admitted she has repeatedly warned Miley to cut back on her partying and take it easy.
Demi acknowledged: ''She knows how I feel about the whole partying thing. I love her to death. And I'm always like, 'Just be careful.' And she's like, 'Dude, I'm chilling. It's fine.' I care for her so much [that] I'm so protective, but she's good. She's got a good head on her shoulders.''