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"He approached me in the latter part of last year and said did I want to play, and did [Mr Key's son] Max play and was he keen to come along," Mr Key told RadioLive this morning.
"Obviously, privately, I was excited by the concept of it and thought it would be fantastic if it happened but I'm also conscious of the fact he's the leader of the free world."
Photos emerged early this month of Mr Key and Max playing a round with Mr Obama and a presidential aide while both families holidayed in Hawaii.
Until now, Mr Key has not spoken about what was discussed on the golf course, or even who won.
But Max, 18, posted a photo of himself with Mr Obama on Facebook with the comment: "Cheers for the round Mr President."
What's it like playing golf with the most powerful man in the world?
"It was like being on the golf course with a couple of mates," Mr Key said today.
"There was a lot of laughs, a lot of fun, five hours of discussion - which was everything from family and social right through to obviously business matters. But it was a unique and great opportunity for us."
As for who won, Mr Key diplomatically said that he and Mr Obama were on the same team.
"He played really well, I can say that."
The golf outing put Mr Key in rare company. Mr Obama is an avid golfer but prefers to limit his playing partners to a close circle of friends and advisers.
Among those who have also scored invitations to play with Mr Obama in the past are former President Bill Clinton and House Speaker John Boehner.