In his first public comments about Tuesday's elections that saw Netanyahu score a surprise third term, Obama told The Huffington Post he had "indicated that that kind of rhetoric was contrary to what is the best of Israel's traditions."
The White House said earlier this week that Obama had warned Netanyahu on Thursday that his last-minute campaign pledge to oppose the creation of a Palestinian state and his comments about Israeli Arab voters would force a rethink in Washington.
"Although Israel was founded based on the historic Jewish homeland and the need to have a Jewish homeland, Israeli democracy has been premised on everybody in the country being treated equally and fairly," Obama said.
"And I think that that is what's best about Israeli democracy. If that is lost, then I think that not only does it give ammunition to folks who don't believe in a Jewish state, but it also I think starts to erode the meaning of democracy in the country."
The interview, which took place Friday, was published in full Saturday.
Obama also criticized the Israeli leader's tough stance on the Palestinians after his election win, saying the United States is "evaluating" options for peace in the region.
- Taking Netanyahu 'at his word' -
"We take him at his word when he said that it wouldn't happen during his prime ministership, and so that's why we've got to evaluate what other options are available to make sure that we don't see a chaotic situation in the region," Obama said.
Even as Netanyahu scrambled to deny he had ruled out the creation of a Palestinian state -- long the starting point for Middle East peace efforts and a cornerstone of US policy -- the White House indicated it could withdraw its unwavering support for Israel at the United Nations.
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The US president vowed to keep cooperating with the Israeli government on military and intelligence operations, but stopped short of confirming whether Washington would continue to block Palestinian efforts to obtain statehood through the United Nations.
The United States -- a veto-wielding member of the UN Security Council -- has opposed moves at the United Nations to recognize a Palestinian state, saying that must be part of a negotiated peace deal.
It has also shielded Israel from often Arab-led UN votes castigating the Jewish state for various actions, including alleged human rights abuses.
Such a move would represent a major inflection point for US-Israeli relations, the likes of which has not been seen in years, or perhaps decades.
It is now more than 30 years since former president Ronald Reagan allowed anti-Israel resolutions to pass at the UN after Israel bombed Iraq's nuclear facilities.
During their phone call, Obama said he told Netanyahu that "it is going to be hard to find a path where people are seriously believing that negotiations are possible."
Obama also said Israel's elections will not greatly affect his defense of any deal reached with Iran.
"I don't think it will have a significant impact," Obama said.
Iran and six world powers are in negotiations to clinch a landmark deal that would have the country scale back its controversial nuclear program in return for relief from sanctions.
Obama was cautiously optimistic about the progress of the nuclear talks while acknowledging the bitterness between Iran and Israel.
"Obviously, there's significant skepticism in Israel generally about Iran, and understandably. Iran has made vile comments, anti-Semitic comments, comments about the destruction of Israel.
"It is precisely for that reason that even before I became president, I said Iran could not have a nuclear weapon," Obama added.