The South Carolina university was thrust into the political spotlight last month when Bush gave a speech to the 6,000- member student body. Bush has since said he regretted not speaking out more forcefully.
"I'm heartened to hear that Bob Jones University has reversed its ban on interracial dating. It was wrong to begin with," Bush said in a written statement. "Tonight, the school has done the right thing."
In the weeks following Bush's visit, GOP rival John McCain called the policy "idiotic," lashed Bush for not criticizing the university sooner and launched a phone drive in Michigan targeting Catholic voters that drew attention to Bush's visit to Bob Jones, whose founders also have called Catholicism a "cult."
During Friday's interview with Larry King, Jones, a Bush supporter, said the criticism of the Texas governor is "totally unfair," saying the school has a "long tradition" of presidential candidates speaking there, including Ronald Reagan.
He said the intense news media scrutiny has tarnished the school's reputation.
"We're being defined as a racist school. That's all the media is talking about," he said, adding that "we don't hate Catholics, we love Catholics."
Jones said the university first implemented the dating ban more than five decades ago, "because we were trying ... to enforce something, a principle, that is much greater than this. We stand against the one world government, against the coming world of the antichrist."
"The principle upon which it was based is very important, but the rule is not. So we did away with it," he said.
"We realize that an interracial marriage is not going to bring in the world of antichrist by any means."