Cole, a multiple Grammy winner who helped announced Winehouse's record of the year victory at Sunday's ceremony in Los Angeles, criticized the award in an interview on People magazine's website.
"I don't think she should have won," Cole said of Winehouse, who is currently receiving treatment at a rehabilitation clinic for drug abuse.
"I think it sends a bad message to our young people who are trying to get into this business, the ones who are trying to do it right and really trying to keep themselves together," added Cole, 58.
"We have to stop rewarding bad behavior."
Cole, the daughter of legendary crooner Nat King Cole, chronicled her own battle against drug addiction in a 2000 memoir "Angel on My Shoulder."
However the singer was adamant that Winehouse should not have been honored with the music industry's top awards.
"I'm sorry. I think the girl is talented, gifted, but it's not right for her to be able to have her cake and eat it too."
"She needs to get herself together ... this is about discipline and hard work, and you don't get to just do your drugs and go onstage and get rewarded."
Cole had no complaints with Winehouse's Grammys performance, which was beamed to Los Angeles via satellite from London.
"Her performance was fine," Cole said.
"I don't take anything away from her talent, but I just feel like she's stepping into a place that she hasn't earned yet."
Winehouse was the star of Sunday's show, scooping five awards -- including the coveted record of the year, song of the year and best new artist.
Cole however said she would have preferred to see R'n'B stars Beyonce or Rihanna rewarded instead of Winehouse.
"I just feel like they're ready to go the long haul. You can tell how hard they work, they're great people, their heart is in the right place."
"These are the people we should be praising, these are the people we should be encouraging."