He appeared to resist when students from Holy Name High School in Mumbai approached. Eventually, Obama gave in, got up and strutted his stuff, too. He jumped around a little and made awkward sawing movements with his arms.
The first lady seemed to join the children far more enthusiastically than her husband.
For most Hindus and Indians, Diwali is the festival of lights and is celebrated with families performing traditional activities together in their homes.
Obama has called it an honor to be the first president to celebrate the festival of lights at the White House last year.
The Associated Press contributed to this report.