As the two men met at the White House, Obama promised to increase US aid to Jordan from $660 million to more than $1 billion per year.
He also vowed the United States would provide the kingdom with an additional loan guarantee.
King Abdullah said Jordan, the United States and other countries "had to combine our strategies" to combat IS, saying he believed it would be a "generational fight."
"We really have to have a pan-regional approach to this issue. This is a Muslim problem. We need to take ownership of this," the Jordanian monarch told CBS television.
"It's clearly a fight between good and evil," he said, adding: "I think this is a third world war by other means."
"The medium-term is the security aspect, but the long term is going to be the ideological one. There's a lot of leaders around the Arab and Muslim world that have had enough, that want to come and say 'look enough is enough.'"
Signup to our newsletter and follow us on Facebook and Twitter!
Obama said the increased US support aims to boost "political and economic reforms that are taking place inside of Jordan."
This would not only that "the people of Jordan prosper and be self-sufficient, but they can continue to provide an anchor for important efforts that enhance US national security over the long term."
The US aid is effective from 2015 to 2017.
One of America's most stalwart allies in the Middle East, Jordan borders Iraq's Anbar province, which has been largely overrun by Islamic State militants.
It is one of several Arab countries taking part in US-led air strikes against the militant group in Syria.
King Abdullah expressed gratitude for the increased financial assistance, which comes at a "difficult" time for his nation as it grapples with its own Islamist extremists and faces a flood of 1.5 million refugees from war-torn Syria who now make up a fifth of Jordan's population.
"This will have a tremendous impact on Jordanians at all levels. So from all of us, a very gracious thank you to you and your people for this very timely support for our country," Abdullah told Obama.