The two men met briefly before reporters in a room outside the U.N. General Assembly in New York.
"I think this is a badge of honor and I want to thank you for wearing that badge of honor," Netanyahu told Obama, referring to a U.S. pledge to block the Palestinian statehood bid. Netanyahu also said he had "hope that others will follow in your path."
The United States is insisting the Palestinians must return to peace talks with Israel before the statehood issue is addressed.
"I want to thank you Mr. President for standing with Israel and supporting peace. ... We both agree that Palestinians and Israelis should sit down and negotiate. ... This is the only way to get a stable and durable peace," Netanyahu said.
Netanyahu said Obama has "made it clear that the Palestinians deserve a peace but it's a state that has to make that peace with Israeli ... therefore the attempt to shortcut this process and not negotiate a peace and that attempt to get state membership in the United Nations will not succeed."
Netanyahu complained anti-Israeli motions at the United Nations have an "automatic majority."
The U.S. president said, "The bonds between the U.S. and Israel are unbreakable. Peace cannot be imposed on the parties."
Both men ignored shouted reporters' questions about Israel becoming an issue in U.S. presidential politics, with Republicans aggressively courting Jewish voters.