Netanyahu had been expected to visit later in March on a trip coinciding with a major pro-Israel group's annual summit, but his office said he would not travel because he did not wish to come at the height of US presidential primaries.
The spat comes amid tense relations with US President Obama in the last year of his presidency, and shortly before US Vice President Joe Biden was set to touch down in Israel.
"We were looking forward to hosting the bilateral meeting," said Ned Price, a spokesman for the White House's National Security Council. "We were surprised to first learn via media reports that the prime minister, rather than accept our invitation, opted to cancel his visit."
But Netanyahu's office said Israel's ambassador to the US had already informed the White House last week there was a "good chance" Netanyahu would not make the trip.
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It said the ambassador told the White House there would be a final decision yesterday. That day, Israeli news reports erroneously reported that Netanyahu would not travel because he was unwilling to meet with Obama.
Netanyahu was invited to address a summit of the pro-Israel group AIPAC. An Israeli official, who spoke on condition of anonymity because he was not authorised to discuss the issue publicly, said Netanyahu wanted to avoid potential meetings with presidential candidates at the summit.
Netanyahu was accused of siding with Mitt Romney in the 2012 presidential campaign and he appears wary of sparking any additional claims of meddling in American politics.
"It's a tumultuous primary season in the United States ... we don't want to inject ourselves into that tumultuous process," the official said.
Biden's last visit to Israel in 2010 was also marked by a diplomatic spat with Washington, when Israel announced settlement construction plans during his visit.
Netanyahu's office said today the prime minister is "looking forward to the visit of Biden and discussing how we can meet the many challenges facing the region."
Vice President Biden is not expected to offer any new initiative on the Israeli-Palestinian conflict when he travels to Israel and the West Bank.