Hungary's prime minister has told David Cameron Hungarians working in the UK are not "migrants" or "parasites".
Viktor Orban said they paid more into the UK's system in tax than they got out in benefits and should not be "discriminated" against.
For that reason Mr Cameron's demand for a four year benefit ban on new arrivals was "difficult", he said.
But he vowed to work with other East European countries to come up with a solution acceptable to the UK.
Mr Cameron - appearing alongside Mr Orban at a press conference in Budapest - is touring Europe as part of his bid to renegotiate the UK's relations with the EU before holding a referendum on whether the UK should stay in it, or leave.
The PM stressed that he valued the contribution made by Hungarians and citizens of other EU nations in the UK and said: "I am open to other solutions... and I am confident we can reach an agreement."
Mr Orban said he fully supported Mr Cameron's three other reform demands and in some cases wanted to go even further - but said he had a problem with the suggested benefit ban.
"We would like to make it very clear that we are not migrants into the United Kingdom," he said. "We are citizens of a state that belongs to the European Union, who can take jobs anywhere, freely, within the European Union.
"We do not want to go to the UK and take away something from them. We don't want to be parasites. We want to work there. And I see that Hungarians are working very well.
"Those Hungarians that are working well and contributing to the UK economy, they should get respect and they should not suffer discrimination."
Mr Orban said Hungary, the Czech Republic, Poland and Slovakia - known as the V4 - would set up a common position on welfare reform and he saw a "good chance" of agreement with the UK.
Mr Cameron said the four year proposal "won't come off the table" unless something was put in its place and said it was needed to help curb high levels of immigration.
Mr Cameron said he was hopeful of getting a deal at an EU summit in February that he can put to the British people in a referendum by the end of 2017 - but he was prepared for it to take longer to reach an agreement, adding: "What matters to me is substance."
Dutch Prime Minister Mark Rutte, whose country is taking over the EU presidency and will be hosting next month's summit, has said he is "relatively optimistic" Britain can come away with a deal.
Mr Cameron held talks with German Chancellor Angela Merkel on Wednesday in Bavaria, where he attended the annual conference of her sister party, the Christian Social Union, and toured a BMW car plant.
He hailed BMW as "a great example of how working together creates jobs and opportunities that benefit both our countries,", adding: "I firmly believe the EU is stronger with Britain, and that Britain will be at its strongest in a reformed EU."
BMW's director for sales and marketing, Ian Robertson, said the UK had the "most diverse car industry in Europe" and was the company's fourth largest market.
"From an industry perspective we would therefore regret seeing the UK leave the EU," he added.
In other EU referendum news, London Mayor Boris Johnson has said the UK has a "great, great future" outside the EU if Mr Cameron doesn't secure the reform it needs.
Mr Johnson - seen as one of the contenders to replace Mr Cameron as Conservative leader when he quits - said his preference was to remain part of a reformed EU but is waiting to see the outcome of the prime minister's renegotiations.
Asked if he could campaign on the opposite side to the prime minister in the referendum campaign, he said "let's see what happens".
David Cameron's four main aims for renegotiation
- Economic governance: Securing an explicit recognition that the euro is not the only currency of the European Union, to ensure countries outside the eurozone are not disadvantaged. The UK wants safeguards that it will not have to contribute to eurozone bailouts
- Competitiveness: Setting a target for the reduction of the "burden" of excessive regulation and extending the single market
- Immigration: Restricting access to in-work and out-of-work benefits to EU migrants. Specifically, ministers want to stop those coming to the UK from claiming certain benefits until they have been resident for four years.
- Sovereignty: Allowing Britain to opt out from further political integration. Giving greater powers to national parliaments to block EU legislation.