Former league boss Wayne Jackson suggested on Wednesday that financial battlers North Melbourne and Melbourne should combine forces to create one of the strongest brands in the competition.
But Demetriou, who said he hadn't heard Jackson's comments, said the AFL was taking a bigger-picture view.
"We actually want 10 teams in Melbourne," Demetriou said.
"It's important that we have 10 teams in Melbourne and it's important for a number of reasons.
"One is it generates a lot of economy in this state and it generates a significant amount of economy at the MCG and at Docklands.
"You take teams out of that, they will be affected – those venues will be affected, their capacity to pay their loan will be affected."
Demetriou said it wasn't just about a club's right to keep its own identity. He noted the role AFL clubs and football played in the community, and said in the current economic climate the decision to merge two clubs would have drastic consequences.
Having 10 clubs in Melbourne also generated substantial broadcast income, Demetriou said.
"You take two clubs out, then what you'll see is we'll get a reduction in our broadcast rights," he said.
The League is believed to be close to entering talks with networks regarding the next TV broadcast deal.
Demetriou said the AFL offered "a premium product for any television network".
While the League boss wouldn't speculate on the magical $1 billion figure that has been bandied about, he said he had read that Channel 9 had entered the bidding market.
"I can tell you this much; we will not get a drop in our broadcasting revenue."
Demetriou also praised the work being done by several clubs in light of the tough financial environment, and said the AFL was generating many jobs.
"When you split up the club-related jobs at an average of 100 [per club], that's 1600 jobs at AFL clubs. Add all the other jobs that are involved in football, we employ directly or indirectly about 13,500 people.
"So we take that responsibility very seriously. [We're] creating jobs, we've got $140 million worth of infrastructure being built at the moment … there's more jobs with building going on.
"All the clubs are out there doing their bit."
