Malini played a lead role as Basanti in the classic '70s film directed by Ramesh Sippy.
Speaking to The Times of India, the actress said: "I'm okay with every other remake except Sholay. Sholay can't and should never be remade. It is a classic, just like Mughal-e-Azam. The magic which the movie created at that time cannot be repeated."
The Dream Girl star explained that the script could not be successfully adapted to a modern day setting: "Who will believe a village setting with dakus running around, destroying villages? And which girl would now like to wear a ghagra choli?
"Even the so-called 'small town girls' now want to look modern and stylish. And people now travel by aeroplanes - tanga kahan chalta hai? So basically the setting is not right now, so doing a Sholay remake would be a very bad idea.
"That's the reason people didn't accept Ram Gopal Varma's movie."
The 62-year-old actress responded to the news that Karisma Kapoor will be re-enacting her original role in Soham Shah's remake of Satte Pe Satta, saying: "I'm sure she will do a good job of it."
Malini recently starred alongside Sholay co-star Amitabh Bachchan in Bbuddah Hoga Tera Baap.