Clinton, who also grappled with crushing losses to Republicans in congressional elections two years into his presidency, said he thought Obama's deal was the best bipartisan agreement that could be reached and urged disappointed members of his party to give it their backing.
"In my opinion, this is a good bill, and I hope that my fellow Democrats will support it," Clinton said during an appearance with Obama in the White House press room.
In a surprising moment, Obama patted Clinton on the back and then left for a holiday party while the former president took questions from the podium.
Obama secured an $856 billion deal with Republicans that could pass the Senate early next week. The deal extends tax cuts for middle-income earners and the wealthiest Americans and includes an extension of unemployment benefits and a cut in payroll taxes.
Democrats in the House of Representatives have staged a revolt, vowing to toughen estate-tax provisions they say are too generous for the wealthiest Americans.
Obama's meeting with the former president underscored parallels between the political challenges faced by Clinton in 1994 and those confronting Obama now.
Clinton reacted to the defeats in his first term by moving to the political center. He won re-election in 1996, a pattern Obama hopes to emulate in 2012.
White House spokesman Robert Gibbs said Obama requested the meeting, which was held in the Oval Office at 3 p.m. (2000 GMT).
"There are very few that you can talk to that have done the job, obviously, and (Obama) greatly values the ability to do things like that and to have those discussions," Gibbs said.
"He greatly values their candid advice and wants to keep those conversations, I think, appropriately private."
Clinton was known for his strategy of "triangulation," which involved showing a willingness to work with Republicans on issues popular with moderate voters like deficit reduction, even when those bipartisan efforts angered his own party.
Some Democrats see Obama's move on the tax cuts as an example of that strategy.
Obama and Clinton have not always had the coziest relationship. There was tension during the 2008 presidential campaign when Obama and Clinton's wife, Hillary Clinton, were locked in a close race for the Democratic nomination.
The hard feelings eventually abated, especially after Obama tapped Hillary Clinton as his secretary of state.
Obama sat down last month with former Democratic President Jimmy Carter. He spoke recently to former President George H.W. Bush when Obama decided to award the Republican a Medal of Freedom.