Obama told reporters at a joint news conference at the White House that "we're not perfectly aligned," noting the United States has no "blanket no-spy agreement" with any country, including close allies.
Germany and other friendly countries complained when Snowden's disclosures last year revealed U.S. surveillance of foreign leaders as well as screening of foreign phone calls and Internet contacts in investigating terrorist ties.
The Obama administration responded that all countries conduct surveillance on each other, but the President also has ordered changes in U.S. programs.
He said Friday that "it has pained me to see the degree to which" the Snowden disclosures have strained the relationship with Germany, a key ally.
The issue ignited public anger in Europe, including Germany, and Merkel said talks were continuing on reaching agreement on how to proceed.
"There are differences of opinion on what sort of balance to strike between the intensity of surveillance for trying to protect the citizens against threats, and on the other hand, protecting individual privacy and individual freedom .... and that will require further discussion between our two countries in order to overcome these differences of opinion," Merkel said.