In a rare glimpse into the Russian ruler's family life, Putin also told the state-run TASS news agency that he could seek to extend his rule through 2024, but that it would be "harmful" for him to remain president for life.
Putin's daughters -- Maria, 29, nicknamed Masha, and Yekaterina, 28, known as Katya -- are a mystery to Russians, who do not even know what they look like.
But Putin batted away rumours that they were living abroad, saying he meets them monthly.
"I have a packed work schedule. Even my daughters I only see once or twice a month, and then I need to pick my moment," Putin said in the interview.
Asked what country his daughters live in, the former KGB officer said: "In Russia, where else?"
"Of course, they live in Moscow. We meet at home," Putin added.
According to unconfirmed reports this summer, Maria was forced to flee her home in the Netherlands after a missile allegedly supplied by Moscow downed Malaysia Airlines flight MH17 in eastern Ukraine, killing 298 people, mostly Dutch nationals.
The mayor of the Dutch city of Hilversum, which lost several inhabitants in the July 17 disaster, called for her to be deported, before he retracted his "unwise" comments.
Ukrainian activists even published photos and the address of her purported "luxury apartment", urging people to protest outside.
Yekaterina was reportedly set to marry the son of a South Korean general in 2010 but the rumour was denied by Putin's spokesman.
Putin is never officially photographed with his daughters, whose secrecy is in marked contrast to the high profile Tatyana Yumasheva, daughter of his predecessor Boris Yeltsin.
The decision depends on "my inner feelings, my mood," he said.
But he said he didn't plan on staying in power for life. "No, that's not good for the country," he said. "It's harmful and I don't need that."
Putin used the interview to hone his carefully crafted image as a clean-living leader, saying his favourite drink is "ordinary (black) tea", served in a thermal travel mug.
He said he was too busy to have many friends. "All the same I don't feel lonely. However strange that sounds."
Putin's own love life has long been the subject of rumours in a country where the media is largely under tight state control and there is little independently verified information on the lives of Putin's inner circle.
He was first linked to former Olympic rhythmic gymnast Alina Kabayeva several years before his divorce from his wife of 30 years, Lyudmila, a former Aeroflot stewardess, was announced last year.
In 2008 Moskovsky Korrespondent newspaper reported Putin was about to wed Kabayeva, who is 31 years his junior. The newspaper's owner closed it shortly afterwards.
"There is a private life in which no one should interfere -- I've always had a low opinion of those with snotty noses and erotic fantasies who delve into the lives of others," Putin said at the time.
Kabayeva is now the head of a powerful pro-Kremlin media group, after resigning her seat in the Duma, the Russian lower house of parliament, as an MP for Putin's United Russia Party.
Lyudmila Putina has all but vanished from public view after their divorce was finalised in April.