The United States reserves the right to keep all options, including military action, on the table with regards to engaging with Iran, the US president has said after holding talks with Israeli Prime Minister Binyamin Netanyahu.
Addressing the media after meeting with Netanyahu at the Oval Office in Washington, DC, on Monday, Obama said the United States would be circumspect before entering negotiations with Iran.
"We have to test diplomacy, we have to see if in fact they are serious about their willingness to abide by international norms and international law," Obama said.
"We enter into these negotiations very clear eyed. They will not be easy."
Obama also made clear that he reserved the right to take military action against Iran.
The meeting comes just days after Obama's historic phone call with new Iranian President Hassan Rouhani.
Netanyahu urged President Barack Obama to keep tough economic sanctions on Iran in place, even as the US weighs a potential warming of relations and a restart of nuclear negotiations with Tehran's new government.
"If diplomacy is to work, those pressures must be kept in place,'' Netanyahu said during the meeting with Obama.
Al Jazeera's Peter Sharp, reporting from Jerusalem, said Netanyahu would have been heartened by Obama's reassurances that Iran would have to prove itself and that Israel had the right to defend itself.
Netanyahu has been warning the US against equating Rouhani's more moderate rhetoric with substantive changes in Iran's nuclear policy.
The Israeli leader, meeting with Obama at the White House, insisted that Iran's "military nuclear programme" must be dismantled and called for maintaining or strengthening sanctions on Tehran.
Israel considers a nuclear-armed Iran to be an existential threat while Iran denies that it is seeking nuclear weapons.
Before leaving the US on Friday, Iran's new President, Hassan Rouhani, shared a 15-minute phone call with President Obama, during which he said he wanted to seek a deal with world powers on Iran's nuclear programme within months.
The conversation was the highest-level contact between the two countries for more than 30 years - fuelling hopes for a resolution of a decade-old Iranian nuclear standoff.
The sudden prospect of diplomacy with Iran overshadowed a host of pressing issues on the US-Israeli agenda.
Netanyahu has long been sceptical of Obama's preference for negotiating with Iran, repeatedly pressing his US counterpart to issue credible threats of military action if Tehran gets close to producing a nuclear weapon.
Iran has offered to open its nuclear facilities to international inspectors as part of broad negotiations with the United States but has insisted that pursuing a nuclear programme is its right and that the programme is for peaceful purposes
The US, Israel and other allies have long accused Iran of seeking a bomb. Iran says it is enriching uranium for power generation and medical purposes.