The Portugal international accused the attacking midfielder of play-acting and being a theatrical player after the 2-2 Clasico draw earlier this month, and Xavi feels Pepe should have kept his opinion to himself.
"Pepe's comments are out of place. They don't make any sense and don't lead to anything good. Iniesta is the most honest player out there," Xavi told Radio Marca.
The influential midfielder then voiced his opinion that Barca play better football than their arch rivals, even though he admitted the Blancos are very efficient.
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Xavi also had his say on the national side, and believes Spain are a different team than Barcelona.
"I think that Spain are physically stronger than Barcelona. However, Barca probably have more individual talent."
Xavi and Spain are currently preparing for Tuesday's World Cup qualifier against France.