Screen stars Monica Bellucci, Chris Pine and Viggo Mortensen were among those invited to the private Vatican audience, along with award-winning directors Spike Lee, Gus Van Sant and Sally Potter.
Leo, the first US pope, said cinema was a vital "workshop of hope" at a time of global uncertainty and digital overload.
"Cinemas are experiencing a troubling decline, with many being removed from cities and neighbourhoods," he said.
"More than a few people are saying that the art of cinema and the cinematic experience are in danger. I urge institutions not to give up, but to cooperate in affirming the social and cultural value of this activity."
Box office revenues in many countries remain well below the levels recorded before the COVID-19 pandemic.
Multiplexes in the United States and Canada have suffered their worst summer since 1981, excluding the COVID shutdown.
Leo said cinema, which marks its 130th anniversary this year, had grown from a play of light and shadow into a form capable of revealing humanity's deepest questions.
"Cinema is not just moving pictures; it sets hope in motion," he said, adding that entering a theatre was "like crossing a threshold" where the imagination widens and even pain can find new meaning.
A culture shaped by constant digital stimuli risks reducing stories to what algorithms predict will succeed, he said.
"The logic of algorithms tends to repeat what works, but art opens up what is possible," he said.
He urged filmmakers to defend "slowness, silence and difference" when they serve the story.
The pope also encouraged artists to confront violence, war, poverty and loneliness with honesty, saying good cinema "does not exploit pain; it recognises and explores it".
Australia's Cate Blanchett said his call carried weight.
"His Holiness's words today were a real charge not to shy away from difficult, painful stories," she told reporters.
"He really urged us to go back into our day jobs and inspire people."
The pope praised not only directors and actors but the vast array of behind-the-scenes workers whose craft makes movies possible, calling filmmaking "a collective endeavour in which no one is self-sufficient".
At the end of his speech, the long list of invitees met the pope one by one, many offering him gifts, including Spike Lee, who gave him a New York Knicks basketball shirt emblazoned with "Pope Leo 14".
"It was a surprise to me that I even got an invitation," Lee told reporters.
"I've been to Rome many, many times. But (this was) the first time in the Vatican City and the first time meeting the pope. So it was... a great day, a great day."
Ahead of Saturday's meeting, the Vatican shared four of the pope's favourite films: Robert Wise's family musical The Sound of Music, Frank Capra's feel-good It's a Wonderful Life, Robert Redford's heart-wrenching Ordinary People and Roberto Benigni's sentimental World War Two drama Life Is Beautiful.
