Berlusconi appeared to be joking about America's first black president at a news conference following talks with Russia's president.
The Italian leader, who has a history of controversial remarks, was asked by a reporter about the prospect for US-Russian relations, which have plummeted to Cold War-levels in recent months.
Berlusconi responded by saying that the relative youth of Russian President Dmitry Medvedev, 43, and Obama, 47, should make it easier for Moscow and Washington to work together.
Then he said, smiling: "I told the president that (Obama) has everything needed in order to reach deals with him: he's young, handsome and even tanned."
Medvedev did not visibly react to the comment.
Italian news agencies said Berlusconi later defended the remark to reporters as he returned to his hotel in Moscow, calling the statement "a great compliment"
"Why are they taking it as something negative? ... If they have the vice of not having a sense of humor, worse for them," the ANSA news agency quoted him as saying.
Later, Berlusconi told Sky TV-24 Ore that the remark was meant to be "cute" and he lashed out at those who don't see it as such, calling them "imbeciles, of which there are too many."
Berlusconi is infamous for eyebrow-raising comments.
He once compared a German lawmaker to a Nazi camp guard, asserted after the Sept. 11 terror attacks that Western civilization was superior to Islam and more recently, that the new Spanish government had too many women.
Italy's only black lawmaker, Jean-Leonard Touadi, called the comment embarrassing.
"In the United States, a joke like that wouldn't just be politically incorrect, but a great offense to this amazing example of integration, which it seems the Italian premier should take as an example," Touadi said.
