Israeli Prime Minister Benjamin Netanyahu and President Shimon Peres, the President described his experience at the Yad Vashem Holocaust Memorial Centre as 'humbling and inspiring'.
Obama and Netanyahu, long described as quarreling adversaries, appeared together and put their arms around each other as they put on a united front.
Respect: President Barack Obama lays a wreath during his visit to the Hall of Remembrance
President Barack Obama rekindles the eternal flame during his visit to Yad Vashem
President Obama described his experience at Yad Vashem as 'humbling and inspiring'
Obama was famously overheard on an open microphone at the G20 summit in Cannes two years ago, sniping with Nicolas Sarkozy about Netanyahu.
France's then-president told Obama, ‘Netanyahu, I can’t stand him. He’s a liar.’ As reporters listened in, Obama replied, 'You are sick of him, but I have to deal with him every day.’
At Yad Vashem, Obama joked that the embarrassing remarks were meant as fodder for a well-known Israeli TV satire show.
'I know that in Israel’s vibrant democracy, every word, every gesture is carefully scrutinized,' Obama said. 'But I want to clear something up just so you know: Any drama between me and my friend, Bibi, over the years was just a plot to create material for Eretz Nehederet.'
'That’s the only thing that was going on,' he said, as the crowd applauded and laughed. 'We just wanted to make sure the writers had good material.'
The men visited the graves of the two of the founders of modern Israel - Theodor Herzl, the founder of modern Zionism who died in 1904 and former Israeli Prime Minister Yitzhak Rabin, who was assassinated in 1995.
Embrace: President Obama and Israel's Prime Minister Benjamin Netanyahu share an emotional moment
Honoured: President Obama lays a wreath at the grave of former Israeli Prime Minister Yitzhak Rabin who was assassinated in 1995
Remembrance: Obama and Israel's leader leave the grave of Theodore Herzl - the founder of modern Zionism
Concluding his three day visit to Israel, President Barack Obama paid respects to its heroes and reaffirmed his belief in the Jewish state's right to exist.
He declared that the memorial illustrates the depravity to which man can sink but also serves as a reminder of the 'righteous among nations who refused to be bystanders.'
His visit to Herzl's grave, together with yesterday's visit to see the Dead Sea Scrolls, the ancient Hebrew texts, were symbolic stops for Obama.
He was criticised in Israel for his 2009 Cairo speech in which he gave only the example of the Holocaust as reason for justifying Israel's existence.
'Here on your ancient land, let it be said for all the world to hear,' Obama said today. 'The state of Israel does not exist because of the Holocaust, but with the survival of a strong Jewish state of Israel, such a holocaust will never happen again.'
Later in the day, Obama will travel to Jordan where he planned to meet with King Abdullah II. Among the topics is Jordan's struggle with the influx of a half-million refugees from the Syrian civil war.
In talks: The U.S. President in discussion with Rabbi Israel Meir Lau after visiting the Hall of Remembrance
Historic: President Obama joins Israel's leaders in the Holocaust museum, left, before making a speech declaring that the memorial reminds us of the 'righteous among nations who refused to be bystanders', right
Thoughts: President Obama records his feelings in the visitor book after visiting Yad Vashem
Abdullah has voiced fears that extremists and terrorists could create a regional base in Jordan. Before leaving for Jordan, Obama was to have lunch with Netanyahu and then tour the Church of the Nativity in Bethlehem.
Obama and his hosts arrived at the somber Herzl grave site under cloudless skies. Obama approached Herzl's resting place alone and bowed his head in silence. He turned briefly to ask Netanyahu where to place a small stone in the Jewish custom, then laid the stone atop the grave.
'It is humbling and inspiring to visit and remember the visionary who began the remarkable establishment of the State of Israel,' Obama wrote in the Mt. Herzl guestbook.
'May our two countries possess the same vision and will to secure peace and prosperity for future generations.'
At Rabin's grave a short walk away, Obama was greeted by members of Rabin's family. He initially placed a stone on Rabin's wife's side of the grave, then returned to place one atop Rabin's side. In a gesture linking the U.S. and Israel, the stone placed on Rabin's grave was from the grounds of the Martin Luther King memorial in Washington, the White House said.
Rabin, Obama told family members, was 'a great man.
Chatting with the family, Obama joked that 'Bibi arranged for perfect weather,' using Netanyahu's familiar name. He then added that 'Shimon plied me with wine' at the official state dinner yesterday evening.
Unusual: The 2,000-year-old stone from Jerusalem embedded with a gold-coated silicon chip
Unique: The silicon chip is engraved with copies of the Israeli and American declarations of independence
Precision: The stone was created at Prime Minister Netanyahu's request by the Technion¿s Russell Berrie Nanotechnology Institute in Israel
At one point the talk turned to the singer who performed at the dinner, and Obama pointed out that he was known to sing, too. 'They had me on YouTube,' he said with a laugh. 'Check it out - Obama singing Al Green.'
At Yad Vashem, Obama wore a skull cap and was accompanied by Rabbi Israel Meir Lau, a survivor of the Buchenwald Concentration camp who lost both parents in the Holocaust. Among his stops was Yad Vashem's Hall of Names, a circular chamber that contains original testimony documenting every Holocaust victim ever identified.
'Nothing could be more powerful,' Obama said.
The U.S. President has also been bestowed with one of the most unique gifts ever to have been exchanged between world leaders.
The Israeli Prime Minister Benjamin Netanyahu handed over a 2,000-year-old stone from Jerusalem embedded with a gold-coated silicon chip.
According to the Times of Israel, it was created Technion’s Russell Berrie Nanotechnology Institute at the specific request of Netanyahu.
The chip, placed in the middle of the sacred stone, is engraved with the American and Israeli declarations of independence, side by side on the tiny area of just 0.04 square millimeters.
Friendship:President Obama and Prime Minister Benjamin Netanyahu share a private word at a state dinner
Forging ties: President Obama shares a toasts with Israel's President Shimon Peres during his historic visit
Exchange: President Obama presented the Israeli leader with this framed wooden piece of Touro Synagogue -the oldest synagogue in the United States
'It can only be read under a microscope,' said Yvette Gershon a reprsentative from the Technion-Israeli Institute of Technology.
Making Obama's gift involved a marriage of ancient history and complex modern technology: 'The etching was done by accelerating charged atoms, called ions, and bombarding them at various points on the surface of the chip,' said Ms Gershon added.
'When an ion beam hits the chip it creates a tiny recess, in this case 20 nanometers deep,' she explained.
President Obama famously gave former British Prime Minister Gordon Brown a DVD boxset when he visited Washington in 2009.
But it seems this time he has learned his lesson and brought Netanyahu a framed wooden piece of the Touro Synagogue, the oldest synagogue in the U.S. and a national historic site.
According to the Prime Minister's Facebook page, the frame was inscribed with a quote from a letter George Washington wrote about the synagogue: 'Every one shall sit in safety under his own vine and fig tree and there shall be none to make him afraid.'
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