In his weekly web and radio address to the nation, Obama said Americans should not turn against one another by letting this fight be defined as a war between America and Islam, which is what Islamic State wants and only serves to undermine the national security.
He praised Americans who have come together to reaffirm the core values and stand up, forcefully, for freedom of religion.
"In the wake of the attacks in Paris and San Bernardino, I know a lot of Americans are asking -- 'what can I do?' First, as always, we have to stay vigilant," Obama said.
"If you see something that seems suspicious, say something to law enforcement. Over the years, plots have been uncovered because someone saw something and spoke up," he said.
Obama reiterated that one of the most important things Americans can do is to stay true to who they are as Americans.
"Terrorists like ISIL are trying to divide us along lines of religion and background. That's how they stoke fear. That's how they recruit," he said.
"And just as Muslims around the world have to keep rejecting any twisted interpretation of Islam, all of us have to reject bigotry -- in all of its forms. I'll say it again, prejudice and discrimination helps ISIL and it undermines our national security," Obama said.
"The good news is that Americans are coming together to reaffirm the core values that keep us strong. Political leaders across the spectrum -- Democrats and Republicans, liberals and conservatives -- are standing up, forcefully, for freedom of religion," he said.
"Churches and synagogues are reaching out to local mosques -- reminding us that we are all God's children. Grateful citizens are saying thank you to our patriotic Muslim American service members and veterans," he said.
"Some of our greatest sports heroes have reminded us why they're true champions -- and voices for tolerance and understanding. Across the country, Americans are reaching out to their Muslim friends, neighbours and coworkers -- to let them know we're here for each other," Obama said.
"That's the message I hope every Muslim American hears -- that we're all part of the same American family. And it's a message all of us can deliver -- parents to our children, teachers to their students, leaders in politics and business and entertainment," Obama said.
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