"There is military cooperation between Turkey and Israel... but currently there are diplomatic sensitivities that we have to take into consideration," Edrogan told the Dubai-based channel al-Arabiya.
"We have taken the conscience of our people into consideration when we decided... I had to be the voice that expresses the existence of my people and my people were rejecting Israel's participation.
"We discussed it with the responsible parties and said yes, these drills will take place but Israel will not take part in them," he said.
Turkish officials have sent out conflicting signals about the significance of the decision to ask Israel to stay away from the annual "Anatolian Eagle" air exercises, in which it has taken part since 2001.
The Turkish Foreign Ministry said on Monday that it was "not right to make political conclusions out of the postponement of the exercises."
Hopes for 'new atmosphere' in relations
But the previous day Foreign Minister Ahmet Davutoglu signalled in an interview that Turkish anger over the Israeli offensive against the Gaza Strip at the turn of the year had been a contributory factor in the decision.
"We hope that the situation in Gaza will be improved, that the situation will be back to the diplomatic track, and that will create a new atmosphere in Turkish-Israeli relations as well," Davutoglu said in a CNN interview.
"But in the existing situation, of course, we are criticizing this approach, the Israeli approach."
In September, the minister cancelled plans to visit the Jewish state, reportedly after being denied Israeli permission to visit Gaza.
Israel's devastating offensive on the Palestinian territory triggered a sharp downturn in relations with Turkey, its closest Muslim ally since a 1996 security pact.
It also led to the breaking off of Turkish efforts to broker a resumption of peace negotiations between Israel and Syria which began in May last year.
Erdogan said in the al-Arabiya interview that Turkey stood ready to resume brokering the indirect contacts aimed at re-launching US-brokered negotiations severed in 2000.
"If Turkey was asked to play the role of the mediator between Israel and Syria, we will always be ready," he said.
"Syria always trusts and believes in our mediation, but I do not know if it's the same case with Israel... we are nevertheless ready to pick up from where it stopped."