The exchange was the first known direct contact between Putin and Snowden since Russia gave the American refuge last summer after he disclosed widespread monitoring of telephone and internet data by the United States and fled the country.
Snowden was not in the studio with Putin, who angered U.S. President Barack Obama by refusing to send the American home to face espionage charges. He submitted his question in a video clip that a lawyer said had been pre-recorded.
Snowden, 30, wearing a jacket and open-collar shirt and speaking before a dark background, asked Putin: "Does Russia intercept, store or analyse, in any way, the communications of millions of individuals"
"And do you believe that simply increasing the effectiveness of intelligence or law enforcement investigations can justify placing societies, rather than subjects, under surveillance" he asked.
He was speaking in English, and Putin had to ask the anchor for help with a translation of the question.
Putin, a spy during a 16-year career with the Soviet KGB, raised a laugh among the studio audience when he said: "You are an ex-agent. I used to have ties to intelligence. So we will speak to each other in the language of professionals."
Turning to Snowden's question, Putin said Russia regulates communications as part of criminal investigations, but "on a massive scale, on an uncontrolled scale we certainly do not allow this and I hope we will never allow it."
He said the Russian authorities need consent from a court to conduct such surveillance on a specific individual "and for this reason there is no (surveillance) of a mass character here and cannot be in accordance with the law".
The televised exchange allowed Putin to portray Russia as less intrusive in the lives of its citizens than the United States, which he frequently accuses of preaching abroad about rights and freedoms it violates at home.
"We have neither the technical means nor the money at the United States has," Putin added. "But the main thing is that our intelligence services are under the strict control of the state and society."
Putin's refusal to hand Snowden to the United States added to increasingly strained ties between Moscow and Washington that have now been even more severely damaged by deep disagreement over the turmoil in Ukraine and Russia's annexation of Crimea.
Snowden has been kept out of sight, his location secret, but his presence in Russia has angered the United States, whose Justice Department has charged him with violating the Espionage Act.
Snowden fled to Hong Kong in June, then flew to Moscow and was granted asylum for a year - extendable annually - after spending weeks in limbo at Sheremetyevo airport in the Russia capital. The United States revoked his passport.
Putin has repeatedly asserted that Russian intelligence agents have not grilled Snowden for secrets, and that the American can count on asylum only if he refrains from actions aimed at damaging the United States or its ties with Russia.
Russia welcomed Snowden's father for a visit in October and state-run television hosted a group of former U.S. national security officials who handed him an award for "integrity in intelligence".
For Snowden, the exchange with Putin may have been a chance to suggest that he is concerned about surveillance practices not only in the United States but in other countries including Russia, which the United States says has rolled back freedoms under Putin.
A government-connected Russian lawyer who has been aiding Snowden since his arrival, Anatoly Kucherena, said Snowden had - like nearly 3 million other people - decided to pose a question to Putin when he heard of the president's annual Q&A session.
"Edward is good with these technologies. He learned (of the programme) and taped a video," Kucherena told state-run RIA news agency. "He know how to go on the Internet in a secure way, and that is how he sent in his question."