Merkel called the White House on Wednesday, and Obama "assured" her that the U.S. "is not monitoring" her phone calls, and will not in the future.
He did not comment on past monitoring, however.
This comes after allegations that the NSA had read text messages and listened to phone calls of Mexican President Enrique Pena Nieto and recorded more than 70 million calls of French civilian phones.
Merkel said that monitoring of any kind, including targeting her phone, would be "completely unacceptable."
"The United States greatly values our close cooperation with Germany on a broad range of shared security challenges," the White House said in a readout of the leaders' call.
"As the President has said, the United States is reviewing the way that we gather intelligence to ensure that we properly balance the security concerns of our citizens and allies with the privacy concerns that all people share.
"Both leaders agreed to intensify further the cooperation between our intelligence services with the goal of protecting the security of both countries and of our partners, as well as protecting the privacy of our citizens."