The former Florida governor, whose campaign said he met with advocates before the event, was asked about his views on racial disparities in the criminal justice system that have been amplified by recent incidence of unarmed black men dying at the hands of white police officers.
Bush said "these problems have gotten worse in the last few years" and that communities "no longer trust the basic institutions in our society that they need to trust."
He called on local leaders to get more engaged in recognizing the problem, adding that "perception becomes reality, and there is racism in America."
"No one should deny that, although there's been significant progress," he added.
Asked how he can relate to people living with those concerns on a daily basis, Bush pointed to his White House bid.
"I relate to it by running for president to try and create a climate where there is civility and understanding and to encourage mayors, leaders at the local level to engage so that there is not despair and isolation in communities," he said.
Out of the building
After answering the question, he quickly ended his town hall without giving a final statement like he normally does and started working the room -- shaking hands and greeting voters --- as he began making his way out of the building, when a crowd of protesters began chanting "black lives matter."
Bush faced criticism from the Black Lives Matter movement when he defended Democratic presidential candidate Martin O'Malley for telling protesters that "all lives matter."
The former governor addressed the National Urban League conference last month and focused on improving education and particularly expanding school choice as a key step to improving racial inequality.
"People in communities that had no chance, that were assigned to failing schools, the teachers in those schools were not as good as the teachers that were in other schools, the net result was we had these huge divides," Bush said at the town hall. "And it's very easy to understand why that exists."
Bush spokeswoman Allie Brandenburger said that Bush talked about criminal justice among other issues with Black Lives Matter advocates before his event.
"Governor Bush's goal is to unite Americans, not divide them, and that begins with having open, candid conversations with all voters," she said in a statement, adding that they also discussed "barriers to upward mobility" and ways to overcome them.