He made the comments at a press conference in Malaysia at the end of a nine-day trip abroad.
Speaking of the terror group responsible for the recent attacks in Paris, Obama said "they are dangerous" and have caused great hardship to "an overwhelming majority of people".
CNN reports he maintained the global coalition formed to destroy Isis "will not relent".
"We will not accept the idea that terrorist assaults on restaurants and theatres and hotels are the new normal, or that we are powerless to stop them.
"They can't beat us on the battlefield, so they try to terrorise us into being afraid, and changing our patterns of behaviour, and panicking, and abandoning our allies and partners, and retreating from the world.
He said it is "absolutely false" that "we are somehow at war with an entire religion".
"The United States could never be at war with any religion because America is made up by multiple religions. We're strengthened by people from every religion, including Muslim Americans. So I want to be as clear as I can on this - prejudice and discrimination helps [Isis] and undermines our national security."
Obama's strong words came after criticism for his response to the recent terror attacks in France and Lebanon, in which hundreds of people were killed and injured.
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