Washington had been angered after Israeli officials announced, during a visit by Joe Biden, the US vice-president, that 1,600 new housing units would be built in occupied East Jerusalem.
But Netanyahu dismissed the subsequent disputes as "disagreements between friends, and that is how they will stay".
No public statements were made or photo opportunities permitted during the meeting between Netanyahu and Barack Obama, the US president, prompting analysts to describe it as a humiliating snub.
Obama 'disaster'
"We've got a real problem. You could say that Obama is the greatest disaster for Israel," Israel's Yedioth Ahronoth newspaper, quoted an unidentified Netanyahu confidant as saying in the days after the visit.
But Netanyahu on Sunday said that this was not his opinion.
"The prime minister emphatically rejects the anonymous quotes about President Obama that a newspaper attributed to one of his confidants, and he condemns them," a statement from his office said.
And he repeated the message to reporters at the weekly cabinet meeting: "I have heard over recent days anonymous and improper remarks in the media about the US administration and American president.
"I want to say clearly, these comments are unacceptable to me. They do not come from anyone representing me.
"The relations between Israel and the United States are those of allies and friends, and are based on tradition spanning many years," he said.
The cabinet was meeting to find a way out of the confrontation with the US and discuss measures that could see the resumption of indirect peace talks with the Palestinians.
The Palestinians pulled out of the so-called proximity talks after the settlement announcement, demanding that all construction in East Jerusalem and the West Bank is halted before they can resume.
"We cannot resume indirect negotiations as long as Israel maintains its settlement policy and the status quo," Mahmoud Abbas, the Palestinian president, said at a summit of Arab leadersin Libya at the Arab League summit have been united in their condemnation of Israel's settlement activity in occupied Palestinian land.
Coalition threat
Netanyahu's government is dominated by pro-settler parties, including his own, and meeting any US demands on settlements could endanger his coalition.
However, his government is also under threat from the centre-left Israeli Labor party, who will meet next month to discuss quitting the government, one of its minister said on Sunday.
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| The settlement announcement came as the US vice-president, right, visited Israel [EPA] |
"Our parliamentary bloc will meet to re-examine our participation in the governing coalition," Isaac Herzog, the social affairs minister, told Israeli public radio.
"We will reconsider our participation in the government in view of its political programme ... I will recommend joining a Kadima government," he said, referring to the party of Tzipi Livni, the former foreign minister.
"Israel is confronting an international situation and threats from Iran, and this requires a change in the structure of the governing coalition," he added.
Earlier this month, Shalom Simhon, the agriculture minister and another Labor party member, said that the party was considering quitting Netanyahu's government over the row with the US.
Simhon criticised the announcement of plans to build 1,600 new settler homes in East Jerusalem calling it a "grave error."
If Labor quit the coalition it would leave Netanyahu with a razor-thin majority of 61 seats in the 120-member parliament.