"This video - which is widely available on the Web - is clearly within our guidelines and so will stay on YouTube," a spokesman said in a statement.
"However, given the situation in Libya and Egypt, we have temporarily restricted access in both countries. Our hearts are with the families of the people murdered in yesterday's attack in Libya," he added.
The video, made by Israeli-American deemed as offensive to Islam, was dubbed into Arabic and broadcast in part on some Egyptian-based television networks and Google-owned YouTube.
Condemning the attack on US envoy, several countries including Indonesia demanded that YouTube block the 'Innocence of Muslims' video, to prevent it from being watched around the world specially in populous Muslim nations.
Afghanistan has banned YouTube website to stop Afghans watching the film that sparked protests in Muslim nations.