The 'Fancy' hitmaker knew her friend had struggled with her battle with drink and substance addiction and broke her six year sobriety earlier this year, but she felt a sense of pride in the 25-year-old singer for releasing the track.
She told 'Entertainment Tonight': ''I didn't know that she was recording that song, she didn't tell me that. I was just really proud of her that she was honest, because it's really hard to be honest with yourself.
''So, to be honest with the whole world, [to share] something that you struggled with very publicly, it's something that is very admirable. I was very proud of her to see her write that song and put it out.''
Meanwhile Iggy, 28, admitted she was ''worried'' that news of Demi's relapse would leak before she had the opportunity to open up about it on her own terms.
She added: ''I had known about it, as a close friend,'' Azalea, 28, revealed. ''So I had really wanted for her to be the one to tell people that. And I worried a lot, as her friend, that something was going to leak or somebody would somehow take that and use it negatively against her, or to make her seem like she's got a secret.
''It's not my business to say to my friend, 'You need to fess up'. But as a friend, you worry and you're like, 'Oh, my God, my friend, she has this thing that people can use against her and I really want her to own it.' And she did!''
Demi has been open publicly with her battles with addiction - and her stint in rehab in 2010 - and emotionally celebrated her six year milestone during a concert in March.
In the emotional song released last month, she alludes to having relapsed as she sings: ''Mama, I'm so sorry I'm not sober anymore, and Daddy please forgive me for the drinks spilled on the floor.
''To the ones who never left me, we've been down this road before. I'm so sorry, I'm not sober anymore.
''And I'm sorry for the fans I lost who watched me fall again. I wanna be a role model but I'm only human.''
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