US President George W Bush and Israeli Prime Minister Ehud Olmert have used White House talks to step up pressure on Iran over its nuclear programme.
Israel has expressed increasing concern over Tehran's refusal to heed UN calls for it to halt its nuclear programme.
Speaking after Monday's talks, Mr Bush warned that a nuclear-armed Iran would be a "terribly destabilising" force and would have to be isolated by the world.
He and Mr Olmert also discussed Iraq and the Palestinian conflict.
The meeting was Mr Olmert's second at the White House since taking over from Ariel Sharon.
It follows a summer of fighting in Lebanon and Gaza which has forced Mr Olmert to abandon his central policy - unilateral withdrawal from parts of the West Bank.
A recent poll put his approval rating among Israelis at about 20%.
Speaking to reporters after the talks, Mr Olmert said he and Mr Bush had "complete understanding" over their objectives concerning Iran.
Iran's Mahmoud Ahmadinejad has called for an end to the Israeli state
Mr Olmert said Israel would not tolerate a nuclear-armed Iran and would do everything in its power to stop Tehran crossing the "technological threshold" that would allow it to develop nuclear weapons.
He accused the Iranian government of "fanaticism and extremism", saying it threatened not only the existence of Israel, but also the whole world.
Mr Bush said there had to be "consequences" if Iran moved forward with its nuclear programme.
"A good place to start is working together to isolate the country. And my hope is, there are rational people inside the government that recognise isolation is not in their country's interest," he said.
Economic isolation could be one route pursued by the West, he said.
Mr Bush added that if the Iranians wanted to have a dialogue "we have shown them the way forward", referring to US and European Union demands that they halt enrichment.
Donald Rumsfeld, who resigned as US defence secretary after the Republicans lost US mid-term elections last week, was opposed to any dialogue with Iran.
The man expected to replace him, Robert Gates, has suggested that dialogue could be possible.
Speaking earlier on US television, Mr Olmert said Israel was not looking for a confrontation with Iran and would prefer a negotiated resolution.
Iranian President Mahmoud Ahmadinejad has called for an end to the Israeli state and has described the Nazi holocaust as a myth.
Israel and Western powers say his country's nuclear programme is intended for military use.
An Iranian official said on Sunday that Tehran would deliver a "swift, strong and crushing" response to any Israeli military attack on its nuclear sites, which it says are entirely peaceful in nature.
Israel is widely considered to be the only nuclear armed state in the Middle East, although it has never admitted having the capability.
Mr Olmert has said he does not expect any change in Washington's unstinting support for Israel after control of Congress passed from Republican to Democrat.