Mr Netanyahu told Mr Obama that to suggest a return to Israel's pre-1967 borders did not "take into account certain changes that have taken place" in the intervening 44 years.
The president said that the talks, which had overrun in the Oval Office by more than 90 minutes, had been "extremely useful" and although he did not mention the pre-1967 borders, he reiterated the need for "a contiguous, functioning" Palestinian state.
It was the seventh Obama-Netanyahu meeting and came after Mr Obama's speech on Thursday calling for the creation of a Palestinian state on pre-1967 borders triggered uproar in the Israeli government.
During the frosty public show, the Israeli premier told Mr Obama that any peace deal "based on illusion will crash on the rocks of Middle East reality". Israel, he insisted, "can't go back to the 1967 lines".
Mr Netanyahu also warned that Mahmoud Abbas, the Palestinian president, would have to choose between a new unity pact with the militant group Hamas or peace with Israel. Mr Obama agreed with Mr Netanyahu that the Palestinians would have to answer "some very difficult questions" about the recent reconciliation deal between Hamas and Fatah – Hamas still denies Israel's right to exist.
Mr Netanyahu's anger was compounded by the fact that he had been taken by surprise, learning the contents of Mr Obama's Thursday speech about the future of the Middle East just a few hours before it was delivered.
During a furious phone call to Hillary Clinton, the US secretary of state, shortly before the speech, Mr Netanyahu stated that American backing for a state based on the borders that existed before Israel's Six-Day war of 1967 with Egypt, Syria and Jordan was unacceptable.
Mr Obama's speech was delayed for 25 minutes as a result but the US president did not bow to Mr Netanyahu's demands.
Although Mr Obama also spoke of land swaps that would allow Israel to annex some Jewish settlements in the West Bank, Mr Netanyahu said the proposal would leave Israel "indefensible".
His aides went further. "There is a feeling that Washington does not understand the reality, Washington does not understand what we face," one official accompanying Mr Netanyahu to the United States said.
American officials were dismayed that a speech they intended to be remembered for its high-minded embrace of human rights in the Middle East had immediately been embroiled in controversy as a result of Mr Netanyahu's incandescent reaction
They pointed to a November 2009 statement by Mrs Clinton which included almost identical language to that used by Mr Obama on Thursday.
Mr Netanyahu said he would use the trip to demand that his host recant and abide by a commitment made by President George W Bush in 2004 acknowledging that a return to 1967 borders was "unrealistic".
In an often tetchy relationship, Mr Obama has frequently appeared to have come off second best to Mr Netanyahu, particularly over the issue of Jewish settlement construction.
According to officials, Mr Netanyahu hoped to win again by pre-empting the president's speech and delivering his own address to Congress next week in which he would outline peace concessions.
He was expected to offer the Palestinians full sovereignty in much of the West Bank, with the exception of seven areas populated by settlers, East Jerusalem and the Jordan Valley, a significant policy shift for the leader of a right-wing, pro-settler coalition.
Instead, the prime minister's hopes of presenting himself as a magnanimous agent of peace were scuppered after Mr Obama outmanoeuvred him by allegedly moving forward his speech to present a plan that, in Israeli eyes, was much more radical.
While the speech found favour with Israel's centrist opposition, it won few plaudits from Palestinian leaders.
Although Mahmoud Abbas, the president of the Palestinian Authority, did not comment publicly, his aides expressed dismay Mr Obama had so categorically pledged to block their attempt to win UN backing for Palestinian statehood in September.
