Following a two-hour meeting with Nuri al-Maliki, the Iraqi prime minister, at the White House, Bush said, "Our strategy is to remain on the offence.
"No question it's tough in Baghdad. No question it's tough in other parts of Iraq, but there are also places where progress is being made."
"Coalition and Iraqi forces will secure individual neighbourhoods, will ensure the existence of an Iraqi security presence in the neighbourhoods and gradually expand the security presence," Bush said.
Maliki said curbing sectarian violence was the main objective of the security plan and vowed to protect all Iraqis "regardless of ethnic or religious background."
Building up Iraq's security and military in terms of numbers and equipment is also "fundamental" to stabilising the country, he said.
Six weeks ago Maliki launched Operation Forward Together in the capital, which called on Iraqi police and army troops to be deployed in greater numbers, with support from US forces.
Sectarian violence has continued despite the security operation, with insurgents ambushing security forces and sectarian gangs shooting and bombing civilians.
As Bush and Maliki discussed security issues in Washington, a Shia Muslim leader called for residents of Baghdad to be allowed to form self-defence units to protect themselves against sectarian attack.
Abdul Aziz al-Hakim, a leading Shia and the head of the powerful Supreme Council for the Islamic Revolution (SCIRI), said that "people's committees" should be formed to create local protection units.