Political leaders in Northern Ireland have been urged to take "bold moves" to restore peace following the unrest triggered by the Union flag row.
She said those involved in the trouble were "dishonouring our national flag and our country".
Updating MPs on the situation, she said sectarian divisions remained "deeply entrenched" and urged politicians on all sides to address them.
The Cabinet minister said: "The stability delivered by the Belfast Agreement should never be taken for granted. For some, sectarian divisions remain deeply entrenched and it's time for bold moves by Northern Ireland's political leadership to address them.
"We need to build a genuinely shared future for everyone in Northern Ireland. It won't be easy but Northern Ireland's political leadership have already shown themselves to be capable of taking difficult decisions in order to make progress on many matters.
"They have fixed tougher problems than the ones we face today. I believe they can rise to the challenge as they have to so many others in the last few decades."
Ms Villiers said 66 police officers had been injured since violence first flared following the decision to restrict the flying of the Union flag at Belfast City Hall.
She said Police Service of Northern Ireland Chief Constable Matt Baggott believed senior members of the Ulster Volunteer Force (UVF) had been involved in orchestrating the violence, but without the authority of the group's leadership.
Condemning those involved in the unrest she said: "The idea that hurling bricks at police officers is somehow defending the Union Flag or protecting Britishness is incomprehensible. These people are not defending our national flag, they are dishonouring our national flag and our country. What's more they are being reckless with the peace process and all it has delivered."