"Bassam!" Stewart asked at the conclusion of the bit Wednesday. "What was that?"
"America is not that safe anymore. It's a little dangerous," Youssef replied. "I'm a little bit scared to be here."
"You're scared of us? No, no, no. We're scared of you," Stewart said. To which Youssef replied: "Haven't you seen Fox News?"
Youssef talked about recently attending the Time 100 dinner after being named to the magazine's most influential people list. He said such accolades have only made the Egyptian government more angry at him.
"I love it!" he said.
The reunion of the two talk show hosts and friends came weeks after Youssef was jailed and released on bail in Egypt. He was accused of mocking Islam and Egyptian President Mohammed Morsi.
Stewart defended Youssef by saying that without Youssef and others who stood up to former President Hosni Mubarak, Morsi would be in no position to repress the people now mocking him.
Stewart's defense caught the attention of both the U.S. and the Egyptian government: Morsi's office complained when the U.S. embassy in Cairo tweeted a link to the video of Stewart mocking Morsi.
Bassem said on Wednesday's "Daily Show" that the government's decision to go after a comedian demonstrated "great weakness."
Watch the interview: