"I don't think we're losing," Obama said in an interview with news magazine The Atlantic published Thursday, days after the Iraqi city of Ramadi was overrun.
"There's no doubt there was a tactical setback, although Ramadi had been vulnerable for a very long time," he said.
Since August 2014, on Obama's orders, a US-led coalition has hit more than 6,000 targets in Iraq and Syria with airstrikes, with the aim of degrading the Islamic State group.
But the rout in Ramadi has called into question US strategy and the credibility of Iraq's central government.
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Obama blamed it on a lack of training and reinforcement of Iraq's own security forces.
"They have been there essentially for a year without sufficient reinforcements," he said.
"But it is indicative that the training of Iraqi security forces, the fortifications, the command-and-control systems are not happening fast enough in Anbar, in the Sunni parts of the country."
Ramadi is in Iraq's minority Sunni heartland, a short drive from the capital Baghdad.
Both Washington and Baghdad have reluctantly begun to advocate the use of ethnic and religious paramilitaries to bolster the fight.
The United States has pushed Iraq's central government to enlist Sunni tribesmen in Ramadi's Anbar province, something the Shiite-led government has been reluctant to do.
"There's no doubt that in the Sunni area we're going to have to ramp up not just training, but also commitment, and we better get Sunni tribes more activated than they currently have been.