Mr. Obama spoke about the difficult negotiations between Israel and the Palestinians Wednesday during a speech at the University of Indonesia in Jakarta.
He said enormous obstacles remain, but that the United States is committed to a peaceful future that sees Israel and a Palestinian state living side by side.
Mr. Obama had expressed frustration over the peace process upon his arrival in Indonesia.
He also criticized Israel's decision to build 1,300 new apartments in occupied East Jerusalem, saying such activity is never helpful during peace talks.
Israel captured East Jerusalem from Jordanian control in the 1967 Arab Israeli war, and later annexed it in a move not recognized by the international community.
In a statement, Prime Minister Benjamin Netanyahu's office insisted that "Jerusalem is not a settlement. It is the capital of the state of Israel."
Palestinians view East Jerusalem as the capital of a future independent state. The Palestinian news agency WAFA says Palestinian President Mahmoud Abbas has directed an aide to request an "urgent" U.N. Security Council meeting to discuss Israel's new settlement activity.
"East" Jerusalem? I say again, there is no such place. Jerusalem is Jerusalem!! And it belongs to the Children of Israel, the Jews.
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