Netanyahu's remarks after the White House talks underscored how a new U.S. push for Middle East peace had opened one of the deepest divides in years in relations between the United States and close ally Israel.
"Peace based on illusions will crash eventually on the rocks of Middle East reality," an unsmiling Netanyahu told Obama in the Oval Office.
Netanyahu told Obama that Israel was willing to make compromises for peace but flatly rejected the idea of going back to 1967 borders, which he described as "indefensible."
Speaking to reporters after the meeting, Obama said he reiterated the peace "principles" he laid out on Thursday in policy speech on Middle East political upheaval.
Obama embraced a long-standing Palestinian demand that the state they seek in the occupied West Bank and Gaza Strip should largely be drawn along lines that existed before the 1967 war in which Israel captured those territories and East Jerusalem.
The brewing crisis in U.S.-Israeli relations dimmed even further the prospect for resuming peace talks that collapsed late last year when Palestinians walked away in a dispute over Israeli settlement building in the West Bank.
The right-wing Israeli leader has had strained relations with Obama in the past, and their latest meeting seemed unlikely to improve their personal chemistry.
"There is a feeling that Washington does not understand the reality, doesn't understand what we face," an official on board the plane taking Netanyahu to Washington told reporters.