He told reporters at the White House: "We can't do it for them." The president said the US would not send combat troops back into Iraq, but added he had asked his national security team to explore a range of other options that he will review in the coming days.
Mr Obama said the risk posed by terrorists in Iraq could eventually pose a threat to US interests, adding that the White House would pursue diplomatic solutions in Iraq and the surrounding region.
He was reacting after an al Qaeda-inspired group, the Islamic State of Iraq and Levant, captured a series of northern cities and threatened to press forward to Baghdad.
A sharp burst of violence this week led to the evacuation of Americans from a major air base in northern Iraq where the US had been training security forces.
The Iraqi Government has been pleading for more than a year with the US for additional help to combat the insurgency, which has been fuelled by the civil war in neighbouring Syria. Northern Iraq has become a way station for insurgents who routinely travel between the two countries and are spreading the Syrian war's violence.
Iraqi leaders made a fresh request earlier this week, asking for a mix of drones and manned aircraft that could be used for surveillance and active missions.
The US is already flying unmanned aircraft over Iraq for intelligence purposes, a US official said. Nearly all US troops left Iraq in December 2011, after Washington and Baghdad failed to negotiate a security agreement that would have kept a limited number of US forces in Iraq for a few more years.
Earlier, Britain said it would consider offering the assistance of counter-terrorism expertise to authorities in Iraq.
Speaking after talks on Iraq with US Secretary of State John Kerry in London, Foreign Secretary William Hague stressed Britain had no intention of putting military boots on the ground in the country.
But he said a team from the Department for International Development was now on the ground in northern Iraq to see what humanitarian help the UK can give, and made clear Britain was also ready to advise the Baghdad administration on counter-terrorism efforts.
Mr Hague also urged Iraq's political leaders from different communities to unite in responding to the "brutal aggression against their country", and said Britain would continue to press the UN for a concerted international response.
Prime Minister David Cameron spoke with the secretary general of Nato yesterday about the security situation in Iraq but Downing Street stressed the phone conversation with Anders Fogh Rasmussen did not relate to any possible Nato deployment of military resources in the region.
Iraq was top of the agenda for talks between Mr Hague and Mr Kerry on the margins of a London conference on countering sexual violence in conflict areas.
Mr Hague said the situation was "extremely serious", but added that, while fighting continues, "attacks have thankfully slowed in recent hours".
With Iraqi prime minister Nouri al Maliki widely criticised for fuelling the sectarian divide in Iraq by openly favouring the majority Shia population at the expense of the Sunnis, Mr Kerry said it was essential for the country's political leaders to come together in the national interest.
He said: "This needs to be a real wake-up call for all of Iraq's political leaders."