Netanyahu denies any crisis with Obama

* Netanyahu cites differences among friends

* Obama to address pro-Israel lobby on Sunday

(Adds quotes, background)

WASHINGTON, May 21 (Reuters) - Israeli Prime Minister Benjamin Netanyahu denied on Saturday that he was locked in crisis with President Barack Obama after their public dispute over the borders of a future Palestinian state.

"The reports of a disagreement have been blown way out of proportion," Netanyahu was quoted as saying by a spokesman.

At the White House on Friday, Netanyahu bluntly rejected Obama's vision for the borders of a Palestinian state in the occupied West Bank and Gaza Strip, in what appeared to be the opening of a deep divide between the United States and Israel.

In an unusually sharp rebuke to Israel's closest ally, Netanyahu told Obama his endorsement of the Palestinian demand to go back to Israel's 1967 boundaries -- meaning big land concessions -- would leave Israel "indefensible."

But on the eve of an address by Obama on Sunday to the annual assembly in Washington of the pro-Israel lobby organization AIPAC, where the president could face a cool reception from some delegates, Netanyahu appeared to take a step back from confrontation with the U.S. leader.

"It's true we have some differences of opinion, but these are among friends," the spokesman quoted him as saying.

Netanyahu believed that Obama had "shown his commitment to Israel's security, both in word and in deed," the spokesman said. "And we are working with the administration to achieve common goals." (Writing by Jeffrey Heller; Editing by Eric Walsh)