US President Barack Obama has pressed David Cameron to maintain Britain's commitment to meeting the Nato target of spending 2% of GDP on defence.
Despite signs of concern from Washington about impending UK defence cuts, Mr Cameron has steadfastly declined to commit to the 2% benchmark beyond March 2016, saying that any decision must await Chancellor George Osborne's Spending Review in the autumn.
Before meeting Mr Obama for one-on-one talks at the G7 summit in Germany, the Prime Minister announced the deployment of a further 125 Army trainers to Iraq, to help the Baghdad authorities take on the Islamic State extremist group which has seized large swathes of the country as well as parts of neighbouring Syria.
But the announcement was overshadowed by the US President's concern over defence cuts, as well as his comment that America was "looking forward" to Britain remaining in the European Union.
Following the bilateral talks at the Schloss Elmau hotel in the Bavarian Alps, where leaders of seven major industrialised states are meeting for the annual G7 summit, a Downing Street source said that Mr Obama had "touched on" the issue of whether Britain would continue to meet the 2% target.
"The president underlined the importance of the UK and US as the two pillars of Nato, and said he accepted the fiscal challenges but hoped that the UK would find a way to meet it," said the source.
Asked if Mr Cameron had offered any assurances in response, the source declined to "give a running commentary", but said the PM had pointed to the numerous military operations around the world to which Britain has contributed.
Washington is concerned that UK spending on defence may drop below the Nato target of 2% of GDP, with Defence Secretary Ashton Carter last week warning that such a cut would suggest Britain was "disengaged" and could no longer "punch above its weight" on the international scene. Noting that the UK was one of only a handful of Nato states to meet the target, Mr Carter said: "We need an engaged United Kingdom."
Despite lecturing other leaders at last year's Nato summit in Wales on the need to hit the 2% target, Mr Cameron has so far committed the UK to continue meeting it in the financial year 2015/16. And Chancellor George Osborne's demand last week for a further £500 million in Ministry of Defence cuts has fuelled concerns on the Tory backbenches that the UK may drop below the totemic benchmark next year.
Ahead of his meeting with Mr Obama, Mr Cameron was asked what he would tell the US President about Britain's plans for future defence spending. He replied: "I'll say exactly the same as what I'm saying now, which is we've kept our 2% promise - one of the few countries to do it - and we're having a Spending Review in the autumn and we'll announce the results at that time."
The new deployment of British troops comes in response to a request from Iraqi Prime Minister Haider al-Abadi. It will bring to 275 the number of UK military personnel in Iraq.
Mr Cameron said most of the new troops he is sending to Iraq will be involved in operations against improvised explosive devices (IEDs), while around 25 will focus on logistics. When withdrawing from occupied areas, Islamic State routinely leave booby-trap devices on the roads and in cars, homes and official buildings in order to render the area uninhabitable for local people and slow the advance of regime forces.
While Britain's mission in Iraq has so far been largely focused on the Kurdish capital Irbil, the new troops will be stationed at a number of bases around the country, including Baghdad. It is understood they will remain inside bases and will not be deployed in the field.
"I think the biggest challenge that we face in terms of the effect on Britain and the challenge in the world is fighting extremist Islamist terror, particularly obviously in Iraq and Syria, but more broadly," said the Prime Minister.
He said that the new trainers were "a particular request that the Abadi government has made. It's a particular thing that we've been working with the Americans on. I think it's the right thing for Britain to do."
Downing Street said the new deployment would begin "shortly". A spokesman added: "These troops will be behind the wire at all times. That is where the training will take place and they will not be accompanying the forces they are training out on patrols."
The G7 summit hosted by German Chancellor Angela Merkel has so far focused on security risks including Russian destabilisation of Ukraine, Islamist insurgencies from Iraq to Nigeria and the flood of migrants trying to cross the Mediterranean to Europe from Libya.
Mr Abadi is attending the G7 as part of a group of leaders of "outreach states" from areas threatened by Islamist extremists, including Nigerian President Muhammadu Buhari, who is facing an uprising by Boko Haram militants.
Speaking as he began his meeting with "my great friend and partner David Cameron" - who he congratulated on his "resounding" election victory - Mr Obama said he wanted the G7 to discuss the importance of "maintaining the sanctions regime to put pressure on Russia and separatist forces to implement wholly the Minsk agreement".
He added: "We think there can be a peaceful and diplomatic resolution to the problem, but it will require that Europe and the United States and partners across the world stay vigilant and stay focused on the importance of upholding the principles of territorial integrity and sovereignty."
Mr Cameron said the issues "all really come down to two words - prosperity and security, what we want for our people back home, which is the chance of a job and also the chance of greater security, whether we are discussing the situation in Ukraine, the need to fight Islamist extremist terrorism, particularly in Iraq and Syria but elsewhere around the world.
"It's about keeping people safe back at home, where the co-operation between our security and intelligence services and our military is as close as it's ever been and as effective as it's ever been."
Mr Cameron acknowledged that the sanctions imposed on Moscow following the annexation of Crimea last year were also having "an impact" on European states, but made clear he wants them maintained when they come up for renewal at the end of July.
Russia was ejected from the G8 last year because of its interference in Ukraine, where Western nations allege it has given military backing to separatist rebels in the east of the country - something President Vladimir Putin denies.
With Greece's Prime Minister Alexis Tsipras due to meet Putin on June 18 to discuss his country's debt crisis, there are concerns that Athens may break ranks and block the renewal of EU financial and economic sanctions at a Brussels summit at the end of the month.
Asked whether he would back financial incentives to keep on board countries such as Greece which have suffered as a result of the sanctions, Mr Cameron said: "Europe has been united on sanctions ... We need to make sure Europe remains united.
"It has an impact on all countries in terms of putting sanctions on another country. Britain hasn't let our pre-eminence in financial services get in the way of taking a robust response to Russian-backed aggression and I don't think other countries should either."
European Council president Donald Tusk told reporters: "If anyone wants to start a debate about changing the sanctions regime, the discussion could only be about strengthening them."
The summit was taking place amid tight security in the spectacular mountain-top setting of Schloss Elmau, ringed by thousands of police. Demonstrators clashed with police in the nearby town of Garmisch-Partenkirchen, while a few hundred hiked up to the venue to protest outside its perimeter fence.
But there was a warm welcome for Mr Obama, who enjoyed a pre-summit lunch of German sausages and beer with Mrs Merkel, and revealed that he was hoping to buy some traditional Bavarian lederhosen - leather shorts - while he was there.
Campaign group One released giant balloons featuring the faces of the seven leaders - Mr Cameron, Mrs Merkel, Mr Obama, French President Francois Hollande and prime ministers Matteo Renzi of Italy, Shinzo Abe of Japan and Stephen Harper of Canada - in a plea for them not to "talk hot air" about global warming.
The German Chancellor has put climate change top of the agenda, with the aim of securing a united G7 position in favour of strong international agreement in Paris this November on measures to keep temperature rises below 2C.