Make sure the permissions on the ~/.ssh directory and its contents are proper. When I first set up my ssh key auth, I didn’t have the ~/.ssh folder properly set up, and it yelled at me.

• Your home directory ~, your ~/.ssh directory and the ~/.ssh/authorized_keys file on the remote machine must be writable only by you: rwx------ and rwxr-xr-x are fine, but rwxrwx--- is no good¹, even if you are the only user in your group (if you prefer numeric modes: 700 or 755, not 775).
  If ~/.ssh or authorized_keys is a symbolic link, the canonical path (with symbolic links expanded) is checked.
• Your ~/.ssh/authorized_keys file (on the remote machine) must be readable (at least 400), but you’ll need it to be also writable (600) if you will add any more keys to it.
• Your private key file (on the local machine) must be readable and writable only by you: rw-------, i.e. 600.
• Also, if SELinux is set to enforcing, you may need to run restorecon -R -v ~/.ssh (see e.g.Ubuntu bug 965663 and Debian bug report #658675; this is patched in CentOS 6).

http://unix.stackexchange.com/questions/36540/why-am-i-still-getting-a-password-prompt-with-ssh-with-public-key-authentication