Obama, speaking at the U.S. Defense Department's National Defense University in Washington, referred to various terrorism threats and how some are fueled by extremists saying Islam is in conflict with the West.
"Most, though not all, of the terrorism we faced is fueled by a common ideology -- a belief by some extremists that Islam is in conflict with the United States and the West, and that violence against Western targets, including civilians, is justified in pursuit of a larger cause," the president said.
"Of course, this ideology is based on a lie, for the United States is not at war with Islam. And this ideology is rejected by the vast majority of Muslims, who are the most frequent victims of terrorist attacks."
However, Obama warned the extremist ideology persists and the U.S. response to terrorism cannot depend just on the military or law enforcement.
The president said the best way "to prevent violent extremism inspired by violent jihadists is to work with the Muslim-American community -- which has consistently rejected terrorism -- to identify signs of radicalization and partner with law enforcement when an individual is drifting towards violence."
Obama said it must be recognized Muslims are a fundamental part of the American family.
"In fact, the success of American Muslims and our determination to guard against any encroachments on their civil liberties is the ultimate rebuke to those who say that we're at war with Islam," Obama said.