Speaking at a town hall meeting in Tampa on Thursday, the president said that the stalled peace process was the result of domestic difficulties faced by leaders on both sides.
"We know what a solution could look like in the region," he said. "But here's the problem that we're confronting right now, is that both in Israel and within the Palestinian territories, the politics are difficult. They're divided."
Responding to a question about the ongoing delays in Israeli-Palestinian talks, the president said Prime Minister Netanyahu wishes to go further than his coalition wants him to advance.
"The Israeli government came in based on the support of a lot of folks who don't want to make a lot of concessions," Obama said. "I think Prime Minister Netanyahu is actually making some effort to try to move a little bit further than his coalition wants him to go."
PM Netanyahu's peace efforts have been endorsed by his leftist Labor party coalition partners, but often criticized by rightist coalition members.
'Israel a strong US ally'
Obama said that he believes President Mahmoud Abbas truly wants peace but needs to counter Hamas, which does not recognize Israel and uses violence.
The president said that the US is currently making an effort to reinforce both sides, so that they can embark on serious negotiations.
During Thursday's meeting, Obama declined under questioning to condemn Israel for actions against the Palestinians. He said Israel is a strong US ally and that he will never waver from helping Israel keep its people safe in a hostile Middle East.
But Obama also said the situation facing the Palestinian people is one that needs attention, too. He said he is seeking a solution in which Israelis and Palestinians can live side by side in peace.
"What I have said and what we did from the beginning when I came into office is to say, we are seeking a two-state solution in which Israel and the Palestinians can live side by side in peace and security," he said. "In order to do that, both sides are going to have to make compromises."
However, both parties must return to the bargaining table, and that is something Obama said he is working to achieve
Associated Press contributed to the story