He said he rejected the intelligence bill, passed by Senate and Congress, as it took "away one of the most valuable tools in the war on terror".
The president said the CIA needed "specialised interrogation procedures" that the military did not.
Water-boarding is condemned as torture by rights groups and many governments.
It is an interrogation method that puts the detainee in fear of drowning.
Speaking in his weekly radio address, Mr Bush did not mention water-boarding specifically.
"The bill Congress sent me would not simply ban one particular interrogation method, as some have implied," he said.
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CIA 'ENHANCED INTERROGATION' TECHNIQUES
Water-boarding: prisoner bound to a board with feet raised, and cellophane wrapped round his head. Water is poured onto his face and is said to produce a fear of drowning
Cold cell: prisoner made to stand naked in a cold, though not freezing, cell and doused with water
Standing: Prisoners stand for 40 hours and more, shackled to the floor
Belly slap: a hard slap to the stomach with an open hand. This is designed to be painful but not to cause injurySource: Described to ABC News by un-named CIA agents in 2005
"Instead, it would eliminate all the alternative procedures we've developed to question the world's most dangerous and violent terrorists."
He added: "This is no time for Congress to abandon practices that have a proven track record of keeping America safe."
Correspondents say the slim margin by which the bill was passed means it is unlikely that the Democratic-controlled Congress could gather enough votes to overturn Mr Bush's veto.
The bill would have restricted Central Intelligence Agency officials to using the 19 interrogation techniques outlined by the US army field manual.
It would ban the CIA from using not only water-boarding, but sensory deprivation and other harsh coercive methods on prisoners.
The CIA recently publicly admitted using water-boarding on three people, including high-profile al-Qaeda detainee Khalid Sheikh Mohammed, but not for the past five years.
Published: 2008/03/08 15:39:56 GMT
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