"I'm going to be sending it back to Congress and my message to them is very simple: 'Let's do this right,'" Obama told reporters on Thursday, Reuters reported.
"We're in the midst of budget discussions. Let's have a budget that properly funds our national security as well as economic security," he told reporters at a rare White House veto signing ceremony.
Obama also said he disagreed with provisions in the National Defense Authorization Act (NDAA) that would have limited his ability to close the Guantanamo Bay detention center before he leaves office in January 2017.
Obama and many of his fellow Democrats want a broader budget deal that would address mandatory cuts in domestic spending rather than only providing more funds for the Pentagon.
Republicans argue that the military should be spared many of the so-called sequestration budget cuts to ensure national security. They accuse Democrats of using the issue to camouflage a desire for irresponsible domestic spending.
"By placing domestic politics ahead of our troops, President Obama has put America's national security at risk," John Boehner, the Republican speaker of the House of Representatives, said in a statement.
Republicans have vowed to override the veto, only the fifth of Obama's presidency, which would require two-thirds majorities in both the House and Senate.
Nancy Pelosi, the House Democratic leader, insists the House will sustain it.
Under congressional rules, the House will consider the veto before the Senate. A vote has been scheduled for Nov. 5.
Democrats insisted a better NDAA would pass easily if the veto is sustained.
"Hopefully we can work together to pass a more balanced and responsible NDAA that truly provides our troops with the resources and budget stability they need," said Senator Jack Reed, the top Senate Armed Services Committee Democrat.