The 79-year-old described the punishment, which also included a suspension for nine international matches, as a "fascist ban".
Suarez received the harshest sanction in World Cup history for biting Italy defender Giorgio Chiellini.
Mujica is renowned for his plain-speaking manner.
He made the comments to state TV at a reception for the Uruguay team, following their elimination from the World Cup last 16 by Colombia.
The president covered his mouth to feign shock at what he had said, but told journalists to "publish it" when asked if he wanted to rectify his remarks.
Mujica admitted that Suarez deserved to be disciplined, but said his suspension was too harsh.
"They could have punished him, but not given him this fascist ban," he said.
The former leftist guerrilla had previously said Suarez was being punished by Fifa because of his humble background.
He also denounced the ban in his weekly radio address as an "eternal shame" in the history of the World Cup.
Oscar Tabarez's side suffered a 2-0 defeat in their last-16 tie against Colombia after being forced to do without their star striker because of the ban.
Uruguay's football federation said it would appeal against Fifa's punishment.
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